Updated: 11/08/2012 3:59 PM
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Credit Card Rewards
More and more credit cards are offering rewards and even cash back. It’s not always easy to know which reward is worth taking and which ones you should pass on. Financial Advisor, Skip Johnson, is here to help get it straightened out.
Make life changes more rewarding
When your life changes, consider changing credit cards. For example, when you’re in college, you want a card that helps you build credit. Once you’re in the workforce, you may want a card with rewards that help you pay for everyday needs like gas or groceries. There are also cards that can help you save for a wedding or save for your child’s college. And, for those looking farther into the future, some cards deposit cash rewards directly into your retirement account.
Maximize rewards, not your wallet
With so many cards offering so many different rewards, you may be tempted to sign up for them all. Don’t do it. Holding too many credit cards can hurt your credit rating. It also can become too hard to keep track of them all. A single late payment fee can quickly erase any benefits you get from the card’s rewards. Limiting the number of cards can also make It easier to keep track of then rewards expire.
More rewards from less cards
Choose cards with the most flexibility. Clothing stores and gas stations offer cards you can use anywhere. But, they only pay rewards when you buy something from them. There are cards that pay you back when you buy gas or clothing no matter where you go.
Your card shouldn’t plan your vacation
Airlines and hotel chains offer credit cards. The rewards can be great. But the rewards can only be used to fly that same airline or stay at that same hotel. If you’re only shopping one airline or one hotel chain, you’re limited on destinations, and might miss out on a good deal. You’ll have more flexibility if you choose a card that offers travel rewards that can be used at any airline or hotel.
Make (no) balance a priority
The more you spend, the more you get back. That’s the allure of rewards cards. But don’t overdo it. A big purchase might get you five percent back. But if it takes you a year to pay it off at 15 percent interest, that cash back goes right back to the credit card company. The lower the balance you carry, the more you’ll get from your rewards.