5 questions to ask when comparing rewards cards

By UK CreditCards.com

If used responsibly, rewards credit cards can save you money and help you earn cashback, points at your local grocery store and even air miles. However, finding the best rewards card for your lifestyle can be difficult -- especially since each card offers very different rewards.


Here are some questions you should ask yourself before signing up for a rewards credit card:

1. Do you spend a lot of time travelling?
If you take frequent family holidays or spend a lot of time flying abroad for business meetings, you might find that a rewards card that offers air miles is extremely beneficial and perhaps even more useful to you than a cashback credit card. However, if you rarely go abroad and have no plans to in the near future, the card issuer could offer you millions of air miles and they would still go unused. When comparing rewards cards, always consider your current lifestyle and ask yourself which benefits you are most likely to use.  

2. What are the interest rates?
Some cards claim to be the best rewards card because they can offer their customers high-value rewards that are worth a significant amount of money. However, there is one very important thing to keep in mind when shopping around for rewards credit cards: the interest rate on the cards.Rewards credit cards are notorious for having high APRs. 

When comparing rewards cards, estimate how much of a balance you plan to carry, along with how much you expect to earn back based on your spending. You may find that the interest payments you make on a monthly basis are higher than the rewards you receive from the card.

3. Do you plan to transfer over a high balance?
If you plan on using a rewards credit card like a standard credit card, you could be in for a bill shock at the end of the month if the APR is too high. If your new rewards credit card will be your main card, you need to consider whether you can pay off the full balance before the interest-free period runs out.

If you currently carry a balance and plan to transfer it over to your new rewards card, consider the card's APR and calculate how much time it will take you to repay the card's balance before the promotional period expires. Don't forget to include balance transfer fees and other costs in your calculations.

4.  How often do you use your credit card?
Rewards credit cards often come with an annual or monthly fee for the privilege of being a card holder. If you don't really use your credit card that often, can you justify paying the high costs associated with having one? Before getting carried away with all the rewards on offer, take a step back and weigh up the costs of owning a rewards credit card against the benefits you will likely receive. You may find that the amount you're paying in fees is higher than the amount you are earning back. 

5. How organized are you?
Consider this scenario: You have been using your rewards credit card rather excessively in order to earn air miles towards the round-the-world trip you have been planning. However, when you finally go to use those hard-earned air miles, you find out that they have expired. Nearly all rewards credit cards, particularly ones offering air miles and points have expiry dates for their rewards. It is important to make sure that you read the terms and conditions carefully before diving in head first and consider whether you have the time and patience to keep track of your rewards.

See related: New cashback credit card deals hit the market; How to compare airline rewards cards

Published: 30 August 2011