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How to pick the right rewards card

A credit card that rewards you when you use it—what could be better? But the right card for a friend of yours might not be a great choice for you. Choosing the best credit card rewards program for you depends on your lifestyle and your priorities. Below are some questions to ask to determine which rewards card might be best for you.

How do rewards work?

Credit card rewards programs reward your spending with some type of perk when you use them; the more you spend, the more rewards you earn. The key is to find the best program to suit your needs. For example, if you don’t drive much, a card that offers gas rewards as its main perk won’t be of much use to you. There are many types of rewards cards available. Look for one that makes it easy to earn something you’ll really need or enjoy.

What can you get?

Many programs allow you to earn one or more points for every dollar you spend on purchases, while others only let you earn points for certain things like gas, groceries or shopping at certain stores. Reward types include:

  • Cash back: Some cash back cards allow you to deposit the cash you earn into your checking, savings or investment account, or credit it to your statement. Others mail you a check.
  • Merchant-specific: These programs offer you money back when you shop with certain merchants. Some also offer discounts on future purchases.
  • Travel: Travel programs offer rewards for using a particular airline, resort, hotel chain or even cruise line. Some cards give discounts on your choice of multiple airlines, as well as hotels, car rentals and restaurants.
  • Gift cards: With some cards, you’re likely to earn rewards points that can be redeemed for gift cards for retailers, restaurants and more.

Other factors to consider

Before you apply for a rewards credit card it may be a good idea to find out the answers to these questions:

  • How do the rewards add up? Consider how many points you earn for a dollar and how many you need to get a reward. Check to see how many points you can earn each year and how quickly those points expire. It usually pays to do some research.
  • How easy is it to get the reward? Many cash rewards programs reward you automatically as soon as you’ve spent enough to qualify. With others, you can redeem your rewards online or by phone whenever you choose. It’s a good idea to check out how user-friendly a card company’s website is before you apply.
  • Is there a catch? Rewards credit cards may charge an annual fee or have higher interest rates than other cards. There may also be a fee to redeem your points or shipping fees to deliver merchandise rewards. A great program may be worth the extra cost, but make sure you know all the details up front.
  • What about late payments? Late or missed payments can affect your ability to earn or redeem points or remove your rewards balance completely. Some issuers charge a fee to reinstate rewards points when a payment is late after a certain number of days.

Before you apply for a card, it’s a good idea to check in on your credit. Some of the best credit card rewards programs may require a higher-than-average credit score. If you think you might need to improve your credit score, the best thing you can do is to pay the bill(s) for your current credit card(s) on time.

When you decide to apply, be sure to remember a few key things: While spending more may earn you more rewards, running up a big balance just for rewards may not be your best option. It’s okay to use your card frequently, but make sure to spend only what you can afford to pay back.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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