This is the 2nd part of Mr Credit Card’s guest post. In the previous post, he focused primarily on how to choose a cash back card to save money. In this post, he is going to discuss more about reward cards that let you earn points. His site has lots of information and you can apply for a credit card there.
In this post, I am going to give a few tips on how to choose a credit card to earn reward points. The decision you have to make is what rewards you want to earn with your points. There are a few broad categories of rewards that are available with most credit cards.
Travel Rewards – These include airline tickets, hotel stays, car rentals, cruises etc.
Merchandise – Most credit card reward programs have partnered up with various retailers and brands to offer their products to their card holders who exchange them for reward points. For example, you may exchange a certain amount of points to get, say, a Nikon Digital Camera.
Gift Cards – You can also exchange points for gift cards. A typical example would be to exchange 10,000 points for a $100 Best Buy Gift Card.
Charity – Most reward programs also allow you to donate points (for cash) to charities (though I doubt that is the intention of most reward card holders).
Most people looking for a reward credit card want to redeem points for airline tickets. The decision they would have to make us whether to get an airline credit card or a credit card with reward programs.
This dilemma is probably the toughest to resolve in any credit card decision because it involves so many factors. You have to ask yourself the following :
1. How Often Do You Fly?
2. Do You Fly with Just One Airline or Many?
3. Do You Spend A Lot on Your Card?
If You Just Fly on One Airline
If you just fly on one airline, then it make sense just to get a frequent flyer credit card.
If You Have Fly on a Few Airlines
If you fly on a few airlines and are a member of a few frequent flier programs, there are a couple of alternatives. For example, the American Express Membership Rewards allows you to transfer points you earn on Amex charge cards to 17 frequent flier miles. This is very valuable and is the reason why Amex is so popular.
The starwood preferred guest program allows you to convert Starwood points to air miles on a one for one ratio for most frequent flyer programs and you even get a bonus 5,000 miles if you transfer 20,000 points. Many frequent travelers carry the Starwood credit card.
If You Are Not a Frequent Flier But Want to Use Points for Airline Tickets
For those do not travel but want to earn points for an airline ticket for a family vacation, most regular reward credit cards should work. These days, most programs allow you to book your own tickets and use points t0 cover for them. That is the advantage they have over frequent flier programs because there are fewer restrictions like blackout dates, etc. that come with regular frequent flyer programs.
Choosing a reward credit card for merchandise redemption is a little tough because it is very difficult to compare the breadth of products available in their catalogs as they are always changing. Furthermore, some programs require less points for certain items but more for others. But generally speaking, after much research, I’ve found the Membership Rewards from AMEX to have the best selection of merchandise in their catalog.
For those who want to use points for gift cards, the best card to get is probably the Discover Card as it has over 100 partners. The Discover Cards allow you to earn cash rebates and if you redeem them for gift cards instead, you double the value of the gift cards you redeem for certain merchants.
Donating to Charity
If you are a charitable person and would like to donate to charities by your credit, most reward programs allow you to do that. Some have many partners while others have just a few. The better ones like American Express allow you to set up your card such that you automatically donate to charities every month.
Shopping With Your Credit Card
Most credit cards today have their own shopping site and partnerships with online retailers so that you can actually earn more points or get discounts when you use your card.
For example, Discover has this feature called shopdiscover.com. The way it works is that you can shop at say bestbuy.com (but going through the discover website) and you can earn 5% rebates when you use your Discover card to shop at their site. American Express has a shopping comparison site called shopamex.com, which lets you compare many items with different retailers. You can then shop at the cheapest online store and even use your reward points to shop.
Most card holders do not use this feature. But you should, since you can save quite a bit by doing so.
When you are researching credit cards, other things to consider are:
1. Do reward points expire
2. Is there a cap to how many points you can earn?
3. How many points you do earn for every dollar that you spend on the card? For most, it will be one point, but many cards lets you earn more points for certain category in spending.
Final Note – While savvy frequent travelers have always used reward cards to their advantage, most credit card holders don’t. To fully take advantage of credit cards (rather than let them take advantage of you), make sure you pay in full, get a card with rewards (whether it be cash back or reward points). You will enjoy savings and perks in many interesting ways.