Am I a responsible credit card user?
The best — and easiest — way to answer this question is with another question: Do you have a spending problem? Or, have you gotten into credit card debt in the past? If your honest answer to either one of these questions is "yes," a rewards credit card may not be right for you. As with all credit cards, you must use them wisely; for some, they can bring more financial harm than good. No rewards credit card, however attractive, is worth going into debt over. It's also not a good financial vehicle for gaining rewards related to a single event, such as saving airline miles for a destination wedding for someone who doesn't normally travel.
If you are confident that you will charge only what you can afford, will pay your bill off in full each month, and will always make your payments on time, then the only question to answer is which rewards card meets your goals.
Will my credit standing benefit from it?
Think of your finances like a toolbox; credit cards are a vital tool, as long as you use them correctly. It's important to make any credit card, including rewards cards, work for you and to avoid the trap of spending money you don't have just to earn rewards you want.
As you practice responsible credit card usage, you'll build an attractive credit history and should boost your credit score, which will qualify you for better rates from not only banks that back credit cards, but also from lenders considering you for car loans and mortgages.
Visit FTC.gov Opens in new window to see how you can get a free copy of your credit report.
Are the rewards useful to me?
Rewards cards work by paying you an incentive on your credit card purchases. Every purchase racks up rewards that you can redeem for cash, miles, points, gift cards, and more. Some rewards cards offer extra benefits for specific types of purchases. For example, an airline credit card might offer you more points when you purchase flights on their airline with their credit card than what you'd earn buying groceries at the store.
Other rewards cards offer more points on gas or groceries, or have a rotating list of weighted point categories that change quarterly.
Finding the best card for you depends on what you want to do with the rewards. There are generally three types:
- Cash — Rewards earned are either paid in cash or credited to your card account; some can be redeemed for gift cards.
- Points — Points are given on each dollar charged; $1 = 1 point; sometimes, double or triple points are offered for a limited time period. Points can be redeemed for items in the card's shopping portal, which is stocked with merchandise from retail partners, or for hotel stays and rental cars.
- Miles — Dollars spent are rewarded with miles that can be redeemed for plane tickets.
If you want to open a rewards card to try to earn free plane tickets or hotel stays for a vacation you're planning, a travel rewards card may be the right fit for you. If you want to earn points that you can redeem for merchandise or transfer to travel partners, a points card may be the best route. If you just want to earn cash back on your normal spending from time to time, consider a cash rewards card.