How to Choose the Best Rewards Credit Card

There are many different iterations of rewards cards, so the trick is finding the one that fits your spending profile. If you’re going for a general card rather than, say, an airlines credit card, you should be willing to sacrifice a higher rewards rate for flexibility and ubiquity. Also, remember that if you carry a balance, you shouldn’t go for a rewards card, which often has a high APR. No matter how good the deal may seem, you’ll probably save more with a low interest credit card.

Main considerations in finding the best rewards credit card:

• Time horizon. Many airline credit cards give you a signup bonus, which can be worth as much as $800, but often charge an annual fee. To find out whether you’ll get value out of a rewards card, consider how long you’d have to hold the card before the annual fee outweighs the signup bonus. Take a card with a $200 signup bonus and a $75 annual fee. If you’ll hold the card for two years, it’s a pretty good deal. If you’ll hold it for five or six, you might be better off with something else.
• Rewards redemption. Knowing how many credit card points or miles you get per dollar isn’t helpful unless you know how much the points/miles are worth. We do our best to calculate the “exchange rate” for you, but it’ll depend on how much you fly on a certain airline, or how fast you can spend them points. For example, it’s good to know you can only redeem Discover Miles Card miles for 0.5 points per 1 cent in cash.
• Rewards caps. Some credit cards will limit your rewards to a certain amount per month (such as the BP credit card), quarter (Chase Freedom), or year (Citi Forward). We’ve factored that into our calculations here.
• Bonus categories. Many credit cards don’t just give a flat rewards rate. They’ll give extra rewards points for gas, groceries, and so on. If you get a store credit card, you’ll get bonus rewards at the branded retailer, of course. More generally, you can find gas credit cards, cards with rotating 5% bonus categories, and ones that always privilege certain spending categories.