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Choosing a Credit Card: The Signup Bonus Is Just the Beginning

Sept. 29, 2014
Credit Cards
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When it’s time to choose a new credit card, it’s easy to get mesmerized by the huge signup bonuses. It’s the credit card equivalent of falling hopelessly in love with someone instantly because of his looks before getting to know his personality. He may be the best guy for you, but without closer examination, you can’t be sure.

Before you go head over heels for a “hunky” signup bonus, ensure that the card it’s attached to will continue to make you happy for years to come. Here are a few considerations — besides the signup bonus — to keep in mind when choosing your next credit card.

How do I spend and redeem?

While a large signup bonus is tempting, remember that you’ll likely have this card over the long term — this isn’t a casual fling. Therefore, if either the rewards earning or redemption doesn’t line up with what you want, the card isn’t for you. For instance, if you primarily spend your money on gas and groceries, a card that rewards you for dining out and traveling won’t allow you to rack up the highest rewards possible. You should choose a card that rewards the categories that you spend in most.

On the other end, you’ll want the redemption options to make sense for you. If you can’t remember the last time you saw the inside of a plane or hotel room, a credit card that awards flight miles won’t get used. Instead, a cash-back option would likely be your best bet — you can use your cash rewards on anything you want or need.

Determine where you’re spending your money and how you want to redeem rewards. You’ll want to choose a card that suits you on both ends — the earning and the redemption.

MORE>> How to Pick the Best Credit Card for You: 4 Easy Steps

Which credit card perks do I want?

There are dozens of added credit card perks in the industry today, but which ones you’ll get depends on the card, issuer and network you choose. Frequent travelers may want trip interruption coverage and checked-baggage insurance. But shoppers who always want the best bargain may be more interested in price protection and online rebate services.

Based on your habits — travel, shopping, etc. — make a list of credit card perks you want in a card. If you actually use them, they may far exceed any attractive signup bonus.

Do I need or want extra time to pay off initial purchases?

First, a disclaimer: You should always pay your credit card off in full each month to avoid accruing interest. However, if you need to make a large purchase and want to take advantage of an interest-free loan, you can choose a credit card with a 0% introductory rate. Generally, this intro period lasts between 12 and 18 months, and then the normal annual percentage rate (APR) kicks in.

If you need or want to take some time paying off your balance at the beginning, make sure to choose a card with an appropriately long introductory period. And don’t forget — pay it off before the intro APR expires.

Bottom line: Signup bonuses are a great credit card perk, but they aren’t the be-all and end-all when it comes to choosing your next credit card. Just like you wouldn’t date someone based solely on looks, you should find out the other qualities of the credit card you have your eye on. Consider your spending habits, ideal redemption method, desired perks and whether or not you need an introductory APR of 0%. Enjoy your new card — we’re sure the two of you will be very happy together.

Attractive man holding credit card image via Shutterstock