I spoke this week about how to pay less interest on the podcast. One of the most important aspects of managing credit is making sure you’re getting more value out of it, then it’s costing you in interest.
Choosing a credit card that meets your needs, while also rewarding you can be challenging. The first consideration, is whether you carry a balance month to month. If you do, please don’t, and there’s plenty of resources on this site that talk about budgeting if you need some help with that. Any type of rewarding credit card is going to come with a substantial interest rate, so these tips are only for those who pay off their balance every single month.
- Determine what type of rewards you are looking for. Cash back and travel rewards are two of the most common types of credit cards. There are also cards that deliver more specific offers to a particular retailer. There are also programs that offer more targeted rewards for certain products.
- Once you determine what type of rewards make the most sense for you, look at the underlying programs. Not all travel points are created equally, what is going to most efficiently deliver the experiences you’re looking for. The amount of points earned relative to the usual price for tickets/hotels etc. is what’s important here. As well look out for limitations or restrictions. If a travel card restricts you to an airline that doesn’t well serve your nearest airport, it’s going to be more difficult to use.
- The same goes for cash back cards, often there are different levels of cash back depending on the type of purchase made, you want to pick which cards best align with your usual spending.
- Be careful with retailer specific cards, the rewards offered need to be worth your time and energy. Every card you have is one more thing to manage, and an extra bit of mental load that makes dealing with your finances more stressful and annoying. You don’t want to end up with 9 different cards you need to think about every single month.
- Visa and Mastercard also offer programs usually attached to more expensive cards. Annual fees can be substantial on higher end cards and it’s important that you consider those costs against the value you’re getting from them. Paying for a fancy credit card that you’ll barely use, and never take advantage of some of the perks is just wasting your money. However, if the services offered by these cards are useful to you, or you have enough regular spending to justify the annual fee against the additional rewards you get from that card, then it’s worth looking into.
Ultimately a credit card should help reward you for what you’re already doing. It should be a compliment to your lifestyle, and help you get a little more out of the money you were spending anyways. When you pick a card, look under the hood and make sure it’s working hard for you. It also doesn’t hurt to review your cards over time, make sure that the rewards you’re getting are still competitive.
If you’d like to learn more about budgeting or listen to this week’s podcast on paying less interest, I’ve linked to them below.