Credit Cards with Rewards | An Expert Guide
Rewards cards are great for consumers who don't carry a balance month-to-month as these cards tend to have higher interest rates. These cards offer an array of benefits, allowing consumers to earn airline miles, hotel or loyalty points and even cash back in exchange for spending. One thing to note: issuers will generally require that you have a good to excellent credit rating to be approved. Click on the images below to get specific advice from our Credit.com experts.
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What To Look For When Applying
As a reward credit card user, you should look for the most valuable rewards from these products, much like investors look for the highest rate of return, including both the sign-up bonus and the rewards for spending. While 1% cash back was once considered to be standard, there are enough cards offering more valuable rewards that 1% is no longer a competitive rate of return. In addition, you can also look for non-spending benefits, such as travel insurance, purchase protection, and perks with travel providers. For example, most airline credit cards now offer travelers some form of priority service or checked baggage fee waivers, and hotel credit cards might offer room upgrades. Finally, you will also want to consider the annual fees charged by most reward cards.
What To Avoid When Applying
Credit cards that offer rewards can be extremely valuable, but there are some drawbacks. For example, reward credit cards can have very high annual fees which may not be justified for modest spenders. They can also carry higher interest rates, which can outweigh what you earn in rewards if you carry a balance. In addition, rewards may be earned in the form of points and miles that can be difficult to redeem. For instance, many airlines make very few seats available for mileage awards at the lowest levels, which leave many airline reward cardholders very disappointed. If you travel outside the United States, you should also be conscious of foreign transaction fees. Some reward credit cards charge a 3% fee on all charges processed outside of the United States, which will negate the value of any rewards you earn.
Should You Apply For More Than One?
The prospect of earning credit card rewards can be so appealing that you might seek to open up more than one card at a time. This can be a worthwhile strategy when you find several exceptional offers, but most reward credit card users are better off taking it slow. First, applying for multiple credit cards can tempt you to spend more money or to incur debt. In addition, applying for multiple new accounts can ding your credit score. The effect is small and temporary, but it is still best to avoid. Finally, if you continue to apply for multiple credit cards, you may find that your applications are denied due to too many recent credit inquiries.
When Is The Best Time To Apply?
Reward credit cards offer the ability to earn valuable points, miles and cash back based on your purchases. In addition, many of these cards feature generous rewards just for opening a new account. Since these sign-up bonuses can vary throughout the year, the savviest reward credit card users will wait until the most competitive offers become available. At the same time, reward credit card users should avoid applying for new credit cards before applying for a large loan such as a home mortgage. Having recent credit card applications can raise concerns to lenders, and applying for credit can cause a small drop in your credit score.
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