I’ve been writing about personal finance since about 2016, when, as a journalist, I spoke almost daily with financial experts about best practices for building wealth. In 2020, after over a year of rigorous study, I became a Certified Professional Financial Planner, which taught me to think critically about financial decisions.
How to register for credit cards.
Credit card rewards have helped me pay for international flights, score great concert tickets, access convenient airport lounges, reduce my statement balance, and so much more. I’m a big fan and I’m not alone.
As of about 2019, Americans are spending more than 90% of total annual credit card spending on rewards cards, according to a report from the Consumer Financial Protection Bureau.
Related: I get free flights just by paying the rental. Here’s how I did it and how you can do it too.
Credit cards are an important tool for building and maintaining good credit. So why not earn extra money and benefits for your daily expenses? As long as you pay your credit card bill in full and on time, the logic holds (unfortunately, more than a half of American cardholders do not).
CFPB reported that cardholders redeemed a total of $35 billion in rewards in 2022 (excluding the value of points or miles earned on co-branded hotel and airline cards). That equates to a reward value of $167 per cardholder, on average, an increase of 44% from 2021.
As a financial planner, my friends and family often ask me which credit card they should use. There is no answer. Instead, my best advice for anyone looking for a rewards card is to keep it simple: Pick two credit cards that offer different rewards and benefit structures, and move on.
Compare the best savings rates
Choose cards that match your current spending habits
Three-quarters of general-purpose credit cards used are rewards cards—the market is saturated. And too many people interpret this to mean that their wallets should be full of them. But the more credit cards you have, the more complicated your monetary system becomes.
Not only will you need to put more thought into which cards to use for specific purchases to earn the most rewards, but you’ll also need to keep track of more balances and bill due dates, and possibly set aside more of your budget to cover them. annual fees.
I’m not in the business of ranking rewards credit cards, but plenty of other journalists and rewards enthusiasts are. Check out their listings and see what interests you. But resist the temptation to purchase the most expensive and flashy card available. Sign-up bonuses are a nice perk, but will the card have any value to you after that?
I recommend trying to have one of each of the two types of rewards cards (points/miles and cash back) and starting with the latter. Cash back cards typically don’t have an annual fee, so there’s no out-of-pocket expense. And you probably won’t need a great credit score to get approved, like you do with premium travel rewards cards.
Cash back credit cards have the simplest rewards structure, giving you a flat percentage discount on different shopping categories, like restaurants or grocery stores. Depending on the card, cash back may appear as a credit on your account statement or be sent as a check. For example, 5% cash back at restaurants means you would earn $5 cash back for every $100 you spend dining out.
If you’re a frequent traveler looking for premium benefits, like airport lounge access, explore your options for a premium travel rewards card (your credit score may be a factor in determining which cards are available to you) .
Travel cards reward you with points or miles for every dollar you spend, with more awarded when you spend on airfare, lodging, and meals. Typically, you get the most value for your points if you use them to buy (you guessed it) more travel, but some cards will also increase the value of your points when you shop with certain brands.
If you’re loyal to a hotel chain or airline, consider a co-branded card that gives you the ability to unlock airline status, free or discounted flights and hotel stays, and other travel-related benefits.
Just remember: your spending shouldn’t depend on what credit cards you have. Choose cards that match your current spending habits, not some future ideal.
