5 easy steps for choosing the right rewards credit card

May 25, 2017

By Maggie Tomasek

5 easy steps for choosing the right rewards credit card

smiling young man pays for coffee using rewards credit card

Sometimes it seems like every other commercial I see is for a different rewards credit card. After a while, they all kind of blend together and start to sound the same.

Of course, they’re not the same. So what’s the difference? And which one is best?

Well, the question isn’t, “Which rewards credit card is best?” The real question is, “Which rewards credit card is best for me?”

By framing your hunt for a new rewards card this way, you can more easily maximize your rewards earnings. Follow these five steps to help you pick the right rewards credit card for you:

Step 1: Look at where you spend your money.

Seriously, you must start here. Some folks get distracted by the lure of flashy-sounding rewards without truly assessing where they’ll use the card. So take a look at your spending patterns over the last year and see what stands out. Are you mostly charging stuff like gas and groceries? Maybe you’re an avid air traveler? Or do you dine out a lot? Keep that info top-of-mind as you go through the next four steps.

Step 2: Decide what kind of rewards you want.

Rewards cards come in four main categories: cash back, reward points, transferrable points and co-branded (aka aligned with an airline, gas station or hotel chain). Based on your spending, what type of card will give you the most value and most enjoyment? For example, if you’re a brand-loyal jetsetter, an airline-specific miles card might be the right choice.

Step 3: Do the math.

You already assessed your spending patterns in Step 1, so it’s time to add up your annual spend and calculate what your rewards card would be worth. (For points- or miles- based cards, what is the earnings rate per dollar spent? And once you have those points or miles, how much are they worth?) Let’s use Alliant’s Cashback Visa Signature card as an example. Look at your spending patterns and calculate how much you could earn with this high-reward credit card with no annual fee. If you qualify for Tier One Rewards and you spend $15,000 on qualifying eligible purchases per month, you'll earn $3,900 cashback per year. If you're in Tier Two Rewards and spend the same $15,000 on qualifying eligible purchases per month, you'll earn $2,700 per year cashback.

Step 4: Read the fine print.

Some cards may sound great at first, but then they require you to jump through hoops to maximize your rewards earnings. So, if you don’t want to worry about travel blackout dates, spending caps or tiered earnings structures, then consider a card with flat-rate cash-back or reward points. Also, if you’re planning to use the card abroad, look for one with no foreign transaction fees.

Step 5: Consider perks and bonuses.

After going through our first four steps, you should be able to narrow your search to a couple credit cards. Now it’s time to look at the fun stuff. Do you want free checked bags, concierge service or airport lounge access? Does the card offer a sign-up bonus? If so, how much is that worth?

Remember: it’s more important to choose a rewards credit card based on the way you spend your money than on the promise of flashy rewards. That way, you can truly maximize your rewards earnings and make the card work for you.

Maggie Tomasek is the PR and Social Media Specialist at Alliant. She began her career as a sports journalist for newspapers in Utica, N.Y., Des Moines and Cincinnati before moving to Chicago in 2009. Maggie is a six-time Chicago Marathon finisher and a lifelong creative writer with a passion for comedy. Her mom instilled in her a great sense of fiscal responsibility, and her big sister told her to throw that responsibility out the window every once in a while in the name of life experience. So far, that combination of financial advice has worked out pretty well for her.

Sign up for our newsletter

Get even more personal finance info, tips and tricks delivered right to your inbox each month.