credit & debt

Plot Your Strategy to Pick the Best Rewards Card

Tips for how to decipher which card best fits your needs.

Using rewards cards can be as simple or complex as you want it to be, so you'll have to decide how deep you want to dive into the game. At one end of the rewards spectrum are cash-back cards that yield straightforward rewards with steady and predictable values. At the other end are travel cards "that can be a little more complex, but you can get more bang for your buck if you're willing to do the research to get a great redemption," says Thomas Donaldson, senior credit specialist for credit card research site CompareCards.

With a card that pays out airline miles, for example, you may squeeze out extra value by combing through flight schedules to find the best redemption rates. If your plans are flexible, you can compare the value of miles needed for flights to multiple destinations and search for flights on off-peak dates.

Also take stock of where you spend the most money. If you buy a lot of groceries and gas, for instance, look for a card that offers at least 2% or 3% back in both of those categories. (Or perhaps you could pick two cards–one that offers at least 5% back on gas and another with big rewards on groceries.)

If you tend to carry a balance from month to month, the interest you pay is likely to cancel out the rewards you earn. A CompareCards survey found that 39% of rewards credit card holders carry a balance, with an average total balance of more than $2,500. That's especially problematic given that rewards cards tend to charge higher interest rates than cards that don't offer rewards. Plus, most credit cards have variable rates. As the Federal Reserve continues to lift short-term interest rates, the interest on any balance you're carrying will rise, too.

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