In an Age of Rewards, Are the Best Credit Card Rates Important Anymore?

Posted in Credit Card Rates , Credit Card Rewards • February 8, 2014

credit card rates

Weighing rewards over credit card rates – it’s a dilemma Americans face each time they take the plastic out of their wallets. There’s no right answer as to which credit card is the best. You might be interested in finding the best credit card with no annual fee, one that offers the most rewards or rebates on everyday purchases or one that allows you to accumulate airline miles for a much-needed vacation. As with all personal financial decisions, finding the best credit card all depends on your goals and your situation.

When to Pick Credit Card Rates Over Rewards

As of March 2013, the average cardholder had a credit card balance of $7,122, as reported by NerdWallet. If you’re one of these average Americans who carry a balance, then choosing the best credit card rates is the way to go. Common sense would point to the fact that accumulating rewards or mileage points while paying compounding high interest rates over the years will end up costing you much more than the price of an airline ticket or a non-discounted gallon of gas.

Also keep in mind that your credit card usage affects your credit score. Financial experts recommend keeping your credit utilization ratio – how much credit you have available compared to what you’ve used – under 10 to 25 percent each month. If you’re tempted to earn a lot of credit card rewards and rebates, you might charge more than recommended and harm your credit score.

Finding the Best Credit Card Rewards

With all the talk of those who carry a rather hefty balance, about a third of Americans pay off their card balances each month. If you’re one of them, then you may want to take advantage of the cash rebates, airline points and other incentives offered by credit card rewards. To be eligible for the best credit card rewards, you’ll need to have a strong credit score of 740 and up. As with a card that you may carry a balance on, be aware of how much credit you are utilizing each month to keep your high credit score.

There are many websites that compare the best credit card rates, offers, fees and perks. In deciding on a card that fits your needs, here are some items to consider:

Signing Bonuses

It may be tempting to sign up for a card that offers an attractive bonus to apply and spend a certain amount within the first couple of months. If your budget has room to spend that minimum amount – and you can pay it off each billing cycle – then perhaps you benefit. Otherwise, you’re spending more than you can afford and the credit card rates will soon eat up any “bonus” you received.

Related: 3 Credit Card Benefits You’re Paying for But Not Using

Teaser Credit Card Rates

Like signing bonuses, low-interest teaser rates can be beneficial under the right financial circumstances. You can leverage a zero percent APR on purchases and balance transfers if you have the funds to pay off the balance in full at the end of the specified introductory period.

Airline Miles

If travel is a priority, you will want to weigh the best credit card rates with frequent flyer promotions. Some travel rewards cards require you to spend a certain amount within the first three months; others have miles with blackout dates and other travel restrictions. Be sure to find out if there are expiration dates associated with the miles – you could spend years saving up frequent flyer miles for a dream trip only to discover that many of them have expired.

Annual Credit Card Fees

If you carry a balance, you might be willing to pay an annual fee in exchange for a lower interest rate; conversely, if you pay off your balance every month, you might not mind a higher interest rate for a no-fee card. Many travel cards also include airline baggage coverage, priority boarding, rental care insurance and other perks that may be worth many times an annual fee.

Always Read the Fine Print on Credit Card Offers

As with any financial transaction, be sure to thoroughly read your credit card agreement before you use the card. Some cards have spending tiers that require you to charge a specific amount to receive the award; others have spending caps that give you decreasing rewards the more you spend. Additionally, there are cards that erase all of your rewards if you are late with payments.

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