Need a New Credit Card? Consider Your Use Before You Choose

There’s no such thing as a “One size fits all” credit card any more, so it pays to do some research and consider how you’ll use the card before you fill out that application form.

Right now dozens of card issuers are offering cash back rewards to get you to choose their card, but you’ll find that some of these cash back cards will benefit you, while others may not.

First, some impose an annual fee while others do not. You’ll have to weigh their rewards against the annual fee to determine whether it makes financial sense to carry those cards.

Most offer 1% back on purchases –  while some offer as much as 5% back under certain circumstances.

That sounds good, but even at 5% cash back, a consumer would have to charge nearly $1,200  just to break even after paying a $59 annual fee. At 1% cash back, he or she would have to charge $5,900!

Many cash-back rewards credit cards today offer 1% on most purchases, but from 2% to 5% on purchases made in specific spending categories. For instance, a card may give back more for use at a luxury hotel or at restaurants. Another might give higher rewards for gasoline or grocery purchases.

Some, such as Discover Cards, offer “bonus” cash-back percentages for use in different categories at different times of the year. They might offer more for resort spending in the summer and for clothing store purchases in winter.

Next, some cards only give rewards after you’ve spent a specific dollar amount. For instance, one American Express card offers 5% back on “ordinary purchases” – but only after you’ve spent $6,500 in a given year. If you don’t charge that much, that incentive is no benefit to you. On the other hand, some restrict the amount you can earn each year.

The way rewards are delivered varies between cards, too. Some will automatically credit your account or mail you a check when your rewards reach a set threshold. Others hang on to the money until you request it.

Some cards allow you to accumulate your rewards as a kind of  “savings account” until you want to use them. Others require you to request the rewards on time or they’ll expire.

With all these variables to choose from, you can probably find a card that fits the way you use credit. So take your time, do your research, and get some true rewards from your cash-back rewards credit card.

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Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.