Credit cards have all sorts of different features. There are a wide variety of perks, ranging from cash back all the way to personalized travel advisors. These cards can include expensive fees and low acceptance rates. Let’s dive into some of these rewards cards.
What are some common credit card rewards?
- Cash back – a certain amount of the money you spent (1-3%) paid back to you are a credit
- Travel rewards – airline miles or points with specific loyalty programs
- Access to airport lounges
- Sign-on bonus of points or miles when you spend a certain amount of money within a few months of opening the account
- Automatic status on airlines
How do I get one of these cards?
Rewards cards are exclusive because they are seen as a status symbol. Part of the benefit is the prestige of having a card that only some people have. The way credit card companies decide who can get these cards is based on their credit score. If you have a particularly high credit score (750+), you have a better chance of qualifying for a rewards credit card.
If you have a low credit score, you are unlikely to get a rewards credit card. If you are in this position, you should look at basic credit cards offered by your bank or non-rewards cards offered by major credit card companies. Keep in mind that your credit score will likely impact the interest rate that you are charged on your credit card, with higher credit scores leading to lower interest rates.
Are these cards worthwhile?
Rewards cards often charge an annual fee. This fee has to be worthwhile for you to get the card. If you get significant benefits from the card, such as travel points or cashback, then a higher annual fee may be worthwhile. If you do not get any fringe benefits from the card beyond using it as a line of credit, it may not be worth an annual fee.
For example, let’s say you spend $10,000 per year on your credit card. If you get 2% cash back, then you will get a cash benefit of $200 ($10,000 x 2%). If the annual fee for that card is $500, then you paid more to use the card than you got as a benefit.
