Read This Before Getting a Rewards Credit Card

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It is tempting when a credit card offers rewards. After all, doesn’t that technically mean you can make money off of your credit card company? You choose a rewards card, sign up, and all of a sudden you’re earning points or miles every single time you ring up a purchase. All you have to do is pay off the credit card in full when it comes due and you’re well on your way to having a bit more money than you did before.

It does sound easy enough, but taking the bait without the hook is more difficult than it sounds. Well-intentioned, well-disciplined people have found themselves in difficult situations with the best of rewards cards. While not everyone loses and you can play the rewards game properly, you should definitely read this before you get a rewards card –  just in case it isn’t the best decision for you.

Can You Control Your Credit Card Usage Responsibly?

Even if you can make a buck or two using a credit card, a credit card is not for everyone. If you’re an impulsive spender, or have a tendency to treat a credit card like “extra” cash, then sometimes going credit free is a better choice. The difficulty comes from spending on your credit card and then not having the money at the end of the month to pay it off. This can be hard for just about anyone, especially for those who are new to credit cards. The vast majority of those who have credit cards carry balances, and carrying any balance from month to month usually ruins any benefit a reward card will give you.

Have You Found the Right Rewards Card for You?

Don’t just pick up the next piece of mail you get with a credit card offer and decide that’s the one you should sign up for. Doing tons of research is paramount to using a credit card correctly. Besides, if you’re using it correctly, you’re not really in any sort of rush and can take your time picking the right card.

  • Points: Points on cards are usually represented by a number, not a monetary value. You can use that number to purchase items through an online “store” that accepts points as a currency (usually this store is run by the credit card issuer themselves).
  • Cash: Some cards work with straight cash, and whenever you spend money, you get a certain percentage back. For example, Chase Freedom has set categories you receive more cash back in then others, and these categories rotate depending on the season and time of the year.
  • Airline miles: Do you fly a lot for business or for pleasure? Airline miles might be a great choice for you. Some of these cards also offer a large sign-up bonus (such as a free flight or two), so make sure you take your time choosing the right one for the right airline.
  • Gift cards: Some rewards cards allow you to rack up point values towards certain gift cards, such as Amazon. Usually These rewards cards are the ones that simply offer you cash, but also offer gift cards if you’d like a little more bang for your buck (so if you have $25 available in rewards, you can purchase a $30 Amazon gift card).

All of these types of rewards have their strengths and weaknesses. It completely depends on what you’re looking for and how often you plan on using the card.

Charge Wisely

Now that you have your card and you’ve decided that you can be responsible with it, it’s time to prove that by choosing the purchases to charge wisely. A balance of a few hundred dollars will often wipe out any benefit reward if it’s left to roll over to the next month and collect interest, so make sure you’re paying the balance in full every month, regardless of how high it is.

While it’s hard to keep tabs mentally, it’s not as hard if you’re writing it down or tracking the purchases done on your credit card somewhere else. For example, some simply track their credit card transaction in their check register and compare the statement to the register later. You can also use certain programs at home to track which purchases have been made and how much you need in your bank account at the end of the month to pay the card in full. No matter how you do it, be consistent for the best results.

Playing the Rewards Game Can Be Lucrative

Playing with credit card rewards can be pretty profitable, but it’s not for everyone. Make sure you’re organized, ready to pay off the card every month, and choose the right card for you. This way, you’re setting yourself up for success and hopefully ensuring you win the game in the long run.

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