Have you ever wondered how, exactly, that forward-thinking friend manages to book free trips to exotic destinations using credit card rewards? Or how your cousin does all her holiday shopping with cashback from her go-to card? And what about that neighbor pulling off that dream remodel of his home at a fraction of market cost by deftly taking advantage of credit card incentives from a local home improvement store?
When it comes to amazing credit card perks, many of us often feel as if we’re on the outside looking in — but it doesn’t have to be that way.
The truth is, if you set your goals and learn how to effectively navigate the marketplace you, too, can likely find a credit card which offers the sort of benefits that will help you take your short- and long-term goals from dream to reality.
This seems basic, but it’s important. If, for example, you plan to pay your credit card off each month, you can shop around for perks without much worry about the interest rate. If, on the other hand, you’ll be carrying a balance and taking more time to pay off your purchases, you’ll need to pay more attention to the rate — otherwise, interest payments might swallow up whatever rewards you're earning.
Those simply seeking to build credit might be best served by a card that has no annual fee and offers some rewards — perhaps cashback.
Where does your money go? It’s a useful question to ask regardless as you build a strategy for every area of your financial life, from retirement savings to building an emergency fund — and choosing the right credit card for your unique mix of needs and resources is no exception. So, track your spending. Does it go mostly toward big ticket items — say, travel or appliances? Or will your credit mostly be used to cover groceries, gas and other, smaller day-to-day purchases?
Keep in mind that different cards reward different types of purchases. Which means that teasing out the trends in your own spending today can pay major dividends down the road when you’re using a credit card that complements your actual money habits.
Next, figure out which types of rewards mean the most to you. If you’re hoping to score free or discounted travel, go on the hunt for cards that offer stellar air miles, hotel points, or rewards that you can use for rental cars, theme park discounts or other travel expenses.
Don’t have any particular niche wishes? That’s okay, too! A number of cards allow those of a more generalist persuasion to earn points toward a wider range of purchases such as clothing, accessories, electronics and travel.
There are, of course, also cards that pay cash back on all or certain types of purchases. In fact, some cards offer an option to deposit any earned cash back into an investment or college savings account. Read the fine print to ensure you’re getting your preferred form of reward before you sign on the dotted line.
Now that you know which type of rewards you want and for what purpose, you’re ready to dive into the marketplace to compare perks and terms.
Throughout your search, you’ll want to keep an eye on the annual percentage rate (APR) of various cards, which is an annualized representation of your interest rate. Divide the APR by 365 to see the daily percentage rate you’ll be charged on any balance subject to interest.
Some cards require an annual fee, another variable you should weigh. If the annual fee comes with zero interest or considerable rewards, it could be worth paying the fee. But weigh these tradeoffs carefully as you proceed.
A card that offers a sign-up bonus or temporary low interest rate may be ideal if you plan to use the card for a large purchase and pay it off before the rate increases. Just be aware that sign-up incentives will go away eventually, so you’ll want to check in frequently to remain up to date on your actual benefits.
Finally, find out whether the cards you’re considering include other fees or other benefits — for example, roadside assistance, concert tickets or rental car insurance.
Though it might be easier to simply apply for the first card that sends a letter to your house or has a telemarketer call your phone, putting in a bit of effort and research ahead of time to gauge your needs and comparing the various costs and benefits of each card can take your credit card perk game to the next level.
Indeed, soon enough you might very well be the one someone else looks at and wonders, “How do they do that with their credit card?!”