How to Choose a Credit Card with Rewards

So you've decided you want to earn rewards for your spending but aren’t sure how to pick the right card?

You'll want to compare rewards, annual fees, and the benefits of each card to choose the right one for you.

Here’s everything you need to know to figure out the best credit card to apply for.

Cash Back with No Annual Fee

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  Chase Freedom Unlimited lets you earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening. Earn unlimited 1.5% cash back on all purchases. There is also a 0% intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.49-25.24%. 3% intro balance transfer fee when you transfer a balance during the first 60 days your account is open, with a minimum of $5. The cash back rewards will not expire as long as your card account remains open. There is no annual fee.

• Chase Freedom lets you earn a $150 bonus after spending $500 on purchases in your first 3 months from account opening. There is a 0% intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.49-25.24%. There is a 3% intro balance transfer fee when you transfer a balance during the first 60 days your account is open, with a minimum of $5.

  This is the fun part: You can earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter. Unlimited 1% cash back on all other purchases. The cash back rewards do not expire as long as your card account remains open. There is no annual fee.

• Citi Double Cash earn cash back twice on every purchase. You earn 1% cash back when you buy, and an additional 1% cash back as you pay for those purchases. There is no annual fee.

Travel Rewards

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  Chase Sapphire Preferred lets you earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®. This card lets you earn 2X points on travel and dining at restaurants & 1 point per dollar spent on all other purchases worldwide.

  Points can be transferred 1:1 to leading frequent travel programs including airline transfer partners. The card has no foreign transaction fees. The card also comes with premium travel and purchase protection benefits (including trip cancellation/trip interruption insurance and auto rental collision damage waiver). There is a $95 annual fee.

• Capital One® Venture® Rewards Credit Card offers a one-time bonus of 50,000 miles if you spend $3,000 on purchases within three months of account opening. 50,000 miles is equal to $500 in travel. This card earns 2x miles per dollar on all purchases. You can redeem miles toward travel purchases on any airline, hotel, or car rental. There are no foreign transaction fees. You get up to $100 credit for Global Entry or TSA Pre✓®. There is a $95 annual fee ($0 intro annual fee for the first year).

• Discover it Miles will match all the miles you've earned at the end of your first year. This offer is limited to new cardmembers only. This card earns 1.5x miles on all purchases and has no annual fee.

Airline Credit Cards

• Delta:
  Gold Delta SkyMiles offers 30,000 bonus miles if you spend $1,000 on purchases within the first 3 months of opening your new account. Plus, earn a $50 Statement Credit after you make a Delta purchase with your new Card within your first 3 months. This card earns airline miles: 2 miles on every eligible dollar spent on purchases made directly with Delta. Earn 1 mile for every eligible dollar spent on other purchases. There is a $95 annual fee ($0 introductory annual fee for the first year) (See Rates & Fees).

  If you fly Delta, here's what you should know: you can check your first bag free on Delta flights with this card - that is a savings of up to $240 per round trip for a family of 4. Plus, you can enjoy Main Cabin 1 Priority Boarding. Terms apply.

• American: Citi AAdvantage offers 50,000 American Airlines AAdvantage® bonus miles after you spend $2,500 in purchases within the first 3 months of account opening. Plus, you earn a $125 AA Flight Discount after you spend $20,000 or more in purchases during your cardmembership year and renew your card.

  This card earns 2 miles for every $1 spent at gas stations, restaurants, and on eligible American Airlines purchases. This card lets you enjoy preferred boarding on American Airline domestic flights. You also get the first checked bag free on domestic AA itineraries for you (and up to 4 companions traveling with you on the same reservation). There is a $99 annual fee (waived for the first 12 months).

• Southwest: Southwest Credit Card lets you earn 40,000 points after you spend $1,000 on purchases in the first 3 months. This card earns 6,000 bonus points after your Cardmember anniversary. You earn 2 points per dollar spent on Southwest purchases and Rapid Rewards hotel and car rental partner purchases. 1 point per dollar spent on all other purchases. There is no foreign transaction fee. There is a $99 annual fee.

Build Credit

• Discover it Secured Card reports to the 3 major credit bureaus to help you build or rebuild credit with responsible use. This secured credit card's variable APR is 24.49%. The minimum refundable security deposit is $200 (up to the amount Discover approves) and your credit line equals your deposit. Starting at 8 months, Discover will perform automatic monthly reviews based on your responsible credit management across all your credit cards and loans to see if you could qualify to transition to an unsecured line of credit. You will see your FICO credit score for free on your monthly statement and in your online account. There is no annual fee.

  But here's where it gets interesting. Discover it® Secured credit card offers rewards: 2% cash back at gas stations and restaurants (on up to $1,000 in combined purchases each quarter); 1% cash back on other purchases. As a promotion for new cardmembers, Discover will match all the cash back you've earned at the end of your first year.

• Capital One® Secured Mastercard® reports to the 3 major credit bureaus to help you build credit when used responsibly. This secured credit card's variable APR is 26.99%. You can receive an initial $200 credit line with a security deposit of $49, $99 or $200, depending on your creditworthiness. And if you make your first 5 monthly payments on time, you can get access to a higher credit line with no additional deposit. There is no annual fee.

• Citi® Secured Mastercard® reports to the 3 major credit bureaus to help you build credit history. This secured credit card's variable APR is 23.99%. A minimum $200 security deposit is required. There is no annual fee.

Keep in Mind

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• No annual fee?
  In general, the higher the annual fee, the better the rewards. But you can still find good rewards cards that have no annual fee.

  You may find that an annual fee is worth it—do the math to see whether the rewards will more than pay for it every year. Will you use the card often enough to earn the fee (which can cost less than $100 to as much as $450) and then some?

  Tip: If you have no tolerance for a yearly fee, read our latest roundup of credit card deals with no annual fees.

• Travel?
  Look out for foreign transaction fees. You do not want to be nickel-and-dimed the next time you are traveling abroad by having to pay an extra 3% or so on each purchase. Or else resolve not to take your new card overseas.

  Tip: Read our best credit cards for international travel for the latest recommendations.

• Cash Back or Miles?
  Keep an eye on promotional offers. You can find cards that will give you a nice chunk of cash back or points in return for charging a certain amount in the first few months of ownership. Banks want your business and usually offer attractive incentives to encourage you to open a new account and start using the new credit card.

  When you're looking at the bonuses different cards are offering, the trick is to not get yourself lured in without reading the fine print. As a trade-off for getting all those points or miles up front, you typically have to meet a minimum spending requirement first.

  Tip: Compare the deals to find the best one for you. Here is a list of current cashback credit card offers and airline miles promotions on CreditDonkey.

• Redemption
  Are you just looking for cash? Cashback credit cards are popular and redemption is so easy to understand (when you have 2,000 points, that’s $20 you can cash in as statement credit or a direct deposit in your bank account). Or are you more interested in rewarding yourself with a hotel stay or an airline trip? Then you’ll want to look at cards that will give you miles in return for your spending.

  Tip: Rewards earned through a travel card are usually worth more (you can stretch out how much the miles are worth if you book through the credit card or transfer them over to a loyalty program) than pure cash. However, travel rewards cards tend to come with an annual fee attached, and are most beneficial for regular travelers (lots of miles are great but only if you’ll actually use them).

Match Rewards to Spending Habits

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Beyond the perks and promotions, you should factor in where your dollars tend to go. Are you a big grocery spender? There are rewards cards for that. Or do you rack up a ton of travel expenses through work? There are rewards cards for that too.

A card that pays out the highest rewards for your biggest spending categories should give you the most value in the long run.

Don't Take on a Card You Don't Understand

Another issue to consider is ease of use. Is redeeming your points going to be a mind game that you can’t get out of, or do you enjoy the hunt for making the most of your miles?

Some people love the excitement of higher reward categories that change every few months (like dedicated users of the Chase Freedom and Discover cards), while others find the whole matter a bit of a hassle to track. If you fall into the latter group, you may be better off sticking with a card that always has the same rewards structure. That way, you don't run the risk of missing out on a bonus deal because you weren’t paying attention.

As a general rule of thumb, the better the rewards a card is offering, the better your credit will need to be to qualify. At a minimum, most rewards cards look for people with good credit when making approval decisions. If you're applying for an premium credit card like the Chase Sapphire Preferred, your score will need to be in the excellent range.

Look for Extras

When you're shopping around for a rewards card, look beyond the initial bonus and the kind of points or miles you can earn. These days, rewards cards come with lots of other incentives that can sweeten the deal, so it pays to review all of the finer points.

The American Express Platinum card is a prime example of a rewards card that takes things one step further. Members get premium benefits like access to select airport lounge programs at no additional charge, round-the-clock concierge service, discounts on cruise and vacation packages, as well as preferred seating to select entertainment and sporting events.

All of those plusses tend to appeal to someone who travels frequently, but if you're more of an everyday spender who doesn’t get to go out all that much, you can still find a card with Membership Rewards but without the annual fee (such as AMEX EveryDay).

Take the time to see what else the card offers beyond basic rewards, or risk seriously shortchanging yourself.

Review Redemption Options

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Earning tons of rewards doesn't do you any good unless you know how to use them strategically. Just as your options for earning rewards vary from one card to another, so do your choices for redeeming them.

With a cash back card, for example, your options for redemption are typically limited to direct deposit, statement credit, or gift cards (with gift cards, you can usually get more for your dollar; the credit card company will give you an extra $5 or $10, depending on what type of gift card you choose). Discover also allows you to use your cash back for purchases made online at selected retailers, including Amazon, as well as donations to charity.

By contrast, a travel rewards card is likely to offer a more extensive range of redemption methods.

With the Chase Sapphire Preferred card, you can redeem your points for things like airfare, hotel stays, and rental cars. If you book travel through Chase’s online portal, Ultimate Rewards, you'll automatically get a 20% discount on your points for even more savings. That makes each point worth 1.25 cents.

Cardholders can also convert their points to gift cards from participating retailers or cash back if they prefer. And points earned with the Sapphire Preferred card can be transferred to participating frequent flyer and hotel loyalty programs on a 1:1 basis. The Membership Rewards Program from Amex also offers the option to transfer points to certain airlines and hotels.

If flexibility is important to you, take a look at a rewards card with multiple redemption options. Keep in mind, however, that your points may not necessarily generate the same value from one redemption option to another. For instance, 10,000 Membership Rewards points would be equal to $100 in travel credit, but they'd only be worth $70 if you're using them to pay for an Amazon purchase.

Pay Attention to Fees and Interest

After you've reviewed how points are earned and how you can use them, the last thing you need to focus on is how much the card is going to cost to use it. While there are some rewards cards that don't charge an annual fee, those that do usually have a more valuable rewards program. You’ll have to figure out if you can always make up the cost of the fee in rewards (i.e., you’ll use the card often enough throughout the year) and whether you’re diligent enough to cancel the card if you end up not using it.

Aside from that, there's also the card's APR to consider. If you're not going to pay the balance in full each month, a higher rate can make your debt much more expensive. When paired with a hefty annual fee, the interest can effectively negate anything you'd be getting in the form of rewards.

Picking the best rewards card for you can feel like searching for a song in a digital music store when you don’t know the name of it. You may fee a little lost at first. Focus on a few priorities, e.g., is no annual fee a top issue for you, do you really, really want to get travel-related rewards, etc.

Evaluate how you spend your money, consider what kind of rewards are most important for you, and think about how you’re most likely going to use them. You’ll then pinpoint the card that's your ideal match.