The Maddening Task of Choosing Credit Card Rewards

Credit card holders often find it difficult to determine which type of credit card rewards offers the best value. Is it better to convert rewards into points for gift cards, use them as travel miles, or simply opt for cash?

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The Catch with Rewards Credit Cards

If you typically carry a balance from month to month, hold off on a rewards credit card. The interest on revolving debt often outweighs the benefits of rewards.

High Interest Rates on Rewards Cards

Rewards credit cards generally have higher interest rates than no-frills cards because banks subsidize the cost of rewards with higher finance charges and annual fees.

Strategic Use of Rewards Cards

Use rewards credit cards for reimbursed company expenses or routine household bills. Avoid long-term financing of large purchases with these cards.

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Managing Your Rewards Wisely

Don't get carried away by the allure of rewards. Avoid making frivolous purchases just to earn points, miles, or cash back.

Understanding the Types of Rewards Credit Cards

• Cash-back Credit Cards: Earn cash rebates on your charges, typically ranging from 1% to 6%.
• Travel Rewards Credit Cards: Accumulate points or miles for travel-related expenses like airline tickets or hotel rooms.
• Points Credit Cards: A hybrid of cash-back and travel cards, where points can be redeemed for cash, travel, merchandise, or experiences.

Maximizing Rewards Credit Cards

• Stay informed about the rules and changes in rewards programs.
• Understand the specific value of cash back, miles, and points for each card.
• Choose a card based on your spending habits and lifestyle.

Evaluating the Worth of Your Rewards

The value of rewards varies depending on how they are redeemed. With cash-back cards, the calculation is straightforward, but the value of miles and points can be less tangible and vary greatly.

Knowing Yourself and Your Preferences

Choose a rewards card that aligns with your lifestyle and spending habits. If you travel frequently, consider a travel rewards card. If you prefer simplicity, a cash-back card might be more suitable.

In Conclusion

Choosing the right rewards credit card involves understanding your spending patterns, the types of rewards each card offers, and how much value you can realistically derive from them.