Five Steps to Choosing the Best Rewards Program Credit Card

 

It sounds like an awful lot of math to calculate. But finding the best rewards program for you is easier than it sounds. Follow the tips below to find out how to choose the best cash back credit card for you.

 

 

Gather together five to seven different credit card programs and list the card names on a piece of paper. You can find information on the web at many sites devoted to credit card comparisons. These sites earn income based on the commissions for credit accounts opened through their sites, so be on guard for over-hyped benefits. 

 

Along the top of your piece of paper, write down the various categories of spending, such as travel, restaurants, gas, gift cards, and a category for everything else. Fill in all of the different payout percentages for each credit card in each category.

 

 

Once you have all of the information on one piece of paper in front of you, it’s time to evaluate. Find the category in which you spend the most money each month. For instance, if you travel a lot for business, then ‘travel’ is a good category on which to base your decision. Or, if your spending habits are random, it is best to base your decision on the ‘everything else’ payout percentage. 

 

Most cards will offer one percent back, but some offer as high as five percent back on certain purchases. Narrow your search to two or three credit cards by crossing off card names that do not have the highest payouts in your preferred category.

 

 

Once you have narrowed your search to two or three credit cards, it’s time to look a little deeper. Something to consider when analyzing is to look at the rewards that are offered other than cash. Some companies might offer a twenty-five dollar gift card to Wal-Mart, and if you calculate the reward percentage, your return may be greater than one percent. 

 

To calculate the reward percentage, divide the amount of the reward by the number of dollars you spent to get it. The gift card can then be used to purchase groceries or toiletries, and the cash you would have spent on those items goes in your pocket. Another thing to consider is annual fees. If a credit card has an annual fee, that cost lowers the actual amount that you get back each year.

 

 

Once you have chosen a credit card, complete your application and you’ll be earning cash back in no time. To maximize your cash back earnings, put all of your purchases on the credit card. Pay your bills, do grocery shopping, get gas and put all other spending on the credit card. Then, be disciplined enough to pay the entire bill when the statement comes. You’ll pay no interest, and you’ll actually be making money off the credit card companies instead of the other way around for once.

 

 

If you find you can handle the one rewards card, you might consider carrying separate product-specific rewards cards for certain purchase categories, such as airline travel or gasoline. One car for gas, one for air travel and a third for everything else may each give the highest rewards in their respective categories. If you can handle paying them off in full every month, you will realize significant savings with all those rewards.