Tuesday, March 1, 2011

Pick a Reward, Any Reward

   The following article was written by Odysseas Papadimitriou, CEO and Founder of CardHub.com, a website that helps consumers compare credit cards and sell unwanted gift cards.  Because I will be writing a post this week on the best cash back credit cards currently offered, I thought that this article was a good primer.

   Do you want a rewards credit card, huh? Well, you’re not alone.  Rewards credit cards are extremely popular because, come on, who wouldn’t want rewards? They’re fun, free and, in the case of those geared toward travel, exotic. Unfortunately, many of the people who want rewards credit cards are actually better served not getting one. If you don’t pay your bill in full every month, you need a low interest credit card. If you don’t have excellent credit, you should look into either second chance credit cards or starter credit cards. Rewards credit cards generally do not fit either bill.

   There are various types of rewards credit cards, each targeted to a different consumer segment. You must be careful in choosing amongst them because picking the wrong one will prevent you from evoking the true potential of this genre. In order to avoid making such a mistake, you must do your due diligence before applying.

   You must consider both your expenses and your lifestyle. Think; what do you spend the most money on? Is it travel? Is it gas? Or are your expenses evenly balanced?

Travel Rewards Credit Cards

   If travel is one of your biggest expenses, a travel rewards credit card might be of significant financial benefit. There are two basic types of travel rewards credit cards: those tied to specific airlines or hotel chains and those that are not. The cards that are affiliated with certain organizations offer more lucrative rewards but only allow the redemption of these rewards when using the services of the company tied to the card.

   If you rack up at least 30,000 miles with the same airline or 20 nights with the same hotel chain per year, then you should get the card tied to that business.
If not, opt for the Capital One® Venture Rewards Credit Card because the miles you earn with it can be redeemed for any purchase made through a travel agency or travel-related website at an effective cash-back rate of 2%.

Gas Rewards Credit Cards

   If you do more driving than flying however, a gas credit card might serve your needs better than the aforementioned travel rewards options, especially considering that gas is expected to rise above $4 per gallon in the near future.
Like with travel rewards, there are two types of gas credit cards: those that are affiliated with certain stations and provide greater rewards and those that allow for logistical variety but are relatively less lucrative. You must essentially balance savings and convenience in deciding between the two. Are the savings provided by a station-affiliated credit card-which can be up to $250/yr.-worth limiting yourself to the use of one chain of gas stations?

   Should the answer to this question be yes, note that the Exxon Mobil Credit Card, the Shell Credit Card, and the BP Credit Card provide the most savings.

   Should the answer be no, consider either the TrueEarnings® Card from Costco and American Express or the Capital One® No Hassle Cash Rewards Credit Card. These are both cash back credit cards that provide particularly lucrative rewards on gas purchases made at any gas station in the U.S.

Cash Back Credit Cards

   Finally, if you travel infrequently and use public transportation or you simply want to get a credit card that provides great overall rewards, no matter what you purchase, you should look into general cash back rewards credit cards. Two of the most widely-used cash back cards are the Bank of America® Accelerated Cash Rewards American Express® Credit Card -which offers 1.25% cash back on all purchases and a $50 statement credit-and the Chase Freedom® Visa – $100 Bonus Cash Back Credit Card-which offers 1% cash back on all purchases as well as 5% quarterly bonus categories and $100 after you make $799 in purchases.

   In the end, the key to making a rewards credit card truly beneficial is picking the right one. So evaluate your expenses, examine your lifestyle and compare options. Then apply and reap the fruits of your labor.

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