Over the last 2 years, I have become more aware of the benefits of switching my spending from a debit card to a credit card that I pay off each month. It’s really a no brainer since you usually don’t get anything from paying for purchases with a debit card, but if you pay that same bill with a credit card there is a good chance you will earn some type of benefit. The key though is always paying off the card each month because if you carry a balance that is subject to interest, you could negate those benefits.
I am going to break down some of the some of the most important things that I look at when selecting a new credit card.
Identify Your Objective
My reason for applying for new credit cards has been finding ways to decrease travel costs and expenses so that my husband and I can travel more. Think about your own situation and what it is you want to obtain from opening a new account.
Which items you consider to be the most important will depend on your personal goals. It could be that you just want to capture missed spend in order to obtain cash back, it might be to amass airline miles for a big trip or to bank hotel points for a future vacation. I find having a goal keeps me on track and helps me to make the best decisions regarding new cards and which cards to use for my spending.
A key feature credit cards offer are the included benefits. These come in many different forms. Credit card issuers add these benefits to their cards to give them more value. Using these benefits can help you to offset the expense of you credit cards annual fee.
- Airline or Travel Credits
- Car Rental Insurance
- Dining Credits
- Concierge Services
- Lounge Access
- Warranty Protections
- Special Offers for Statement Credits
- and the list goes on!
One of my favorite perks last year was the Priority Pass Lounge Access that came with our Hilton Surpass card. We utilized this benefit during a huge flight delay on a trip to Texas last year. Our plane ended up delayed about 3 hours and the lounge gave us someplace nice to wait that out and enjoy a nibble and some adult beverages. It actually saved the day. We also utilized it while waiting to board our plane in Hawaii. Although it is something we could live without, having this benefit just added a little something extra to our trips. If you have it why not use and enjoy it!
But not all benefits are created equal. Some may not be useful to you if they are for things you will just never use or do. Others may not be available in your area. These are things to consider when deciding if a benefit will actually be of value to you. If you can’t use it….it’s probably not.
My husband and I do not live in a big city and don’t have access to programs like Uber, Door Dash, Grub Hub, Lyft, etc unless it is during our travels. There are also some monthly credits on American Express for restaurants that are not located anywhere near us. What is useful to us is not having to pay for extra insurance when renting a car. That saves us approximately $11 per day. We had 10 car rental days last year. Travel and airline fee credits are also very useful. I used all of mine last year and had already used a portion of mine this year before travel stopped due to Covid-19.
CoBranded Loyalty Perks
In order to get the most bang for our buck out of travel, we have signed up for loyalty accounts with many hotel, airline and car rental chains. When I began to think about how to stretch those dollars even further, one of the best options was to sign up for a few CoBranded credit cards associated with those same loyalty programs.
CoBranded cards generally offer the biggest return on spending on their own products. Lets use IHG as an example. You earn a level of base points per dollar spent at IHG hotels just for joining their Rewards Club. But if you also get their card and use it to pay for your reservation, you get an additional 10 times per dollar spent bonus for the same stay. Having their card also comes with some level of status that equates to more perks and rewards during your stay. Best of all, it comes with an annual Free Night Certificate for each year that you continue to keep your credit card with them. The certificate can currently be used for one reward night at a hotel room up to 40,000 points.
These cards usually offer sign up bonuses that provide a large number of points for a set amount of spend in a predetermined time frame. Currently IHG is offering 125,000 points if you spend $3,000 on the card in the first 3 months after opening. The Bonuses offered by CoBranded cards are usually enough to be a really good value.
Some hotel credit cards also offer the option to earn additional Free Night Certificates for meeting another predetermined spend amount with their card during the course of a year. Southwest airlines awards you with a block of anniversary points each year that you have their card and offers you a chance to earn a companion pass if you meet their annual points criteria.
The downside of CoBranded cards is that they tend to be one trick ponies. By that I mean that you earn higher points for their product but pretty much 1 point per dollar on everything else. So unless you are using them for a lot of brand specific purchases, or can take advantage of special offers, it can take a while to earn a lot of points.
CoBranded cards are issued from a specific bank like American Express or Chase Bank. Those banks usually offer other credit cards that give you higher points earning potential and transfer options to the loyalty accounts within their portfolio. Cards like the American Express Gold or Platinum as well as the Chase Sapphire Preferred or Reserve allow you to transfer your points to any loyalty account that is also serviced by one of their card credit cards (even if you just have a loyalty account but don’t hold that CoBranded card). So if you are going to have a CoBranded card or two, it is also helpful to hold a universal points card that offers transfer options.
Last year we signed up for a Chase Sapphire card that came with a 60,000 point sign up bonus. We do not have a Chase CoBranded card from World of Hyatt but were still able to transfer 45,000 of our Sapphire points to our Hyatt loyalty account for 3 reward nights in Waikiki.
High Points or Cash Back Categories
One of the most important reasons for choosing a credit card is to earn points, miles or rewards toward something you desire. You can only redeem your points if you find a way to earn them first. That being said, look for cards that have spending categories that you will will be able to use a lot and that offer higher point levels.
Last year when my son visited, he asked me to help him Maximize his return on Spending. We took a look at his current spending and found that Dining, Groceries, Gas and Entertainment were the 4 categories he spent the most in. We also discussed his goals and determined that he preferred cash back instead of points or miles toward travel. It was a good exercise for both of us and we were able to match him to 2 credit cards that captured those categories and provided him much better cash back returns for his day to day spending.
Although it is nice to earn the most points or cash back from your spending that you can, it is even more important to be achieving a reward that is right for you and that you will actually use. If you don’t stay in hotels, look at airline cards. If you aren’t looking for points toward travel, look at cash back cards or cards that earn all purpose points that can be transferred to loyalty accounts or redeemed for many different types of rewards. There are a lot of cards out there so there is bound to be one that is right for you, it just takes a little research.
Have a Goal
We didn’t sign up for the Hilton Surpass card just because we got a big sign up bonus (which we did) or because Hilton is our favorite hotel chain (we had never stayed in one prior to this), it was because the potential to earn points was very high for us based on our spending. When we chose this card we were specifically looking at a card that would give us a good return on my husbands spending.
He commutes to work which means fuel purchases were a top consideration. The Hilton Surpass card earns 6 points per dollar spent on gas! That’s a pretty awesome return. It is also our go-to card for dining out since it nets us another 6 points per dollar for that and 6 points on groceries too. Additionally if you use it to book a Hilton hotel stay, you earn a hefty 12 bonus points per dollar spent.
Even though we didn’t have any immediate need for Hilton points, we decided to play the long game and just save as many points as we could until we are ready to redeem for a big vacation down the road. The Hilton Surpass card also comes with a Free Weekend Night Certificate good at any points level hotel in the Hilton portfolio. That is a really great perk. We had planned to use ours at the Conrad Algarve in Portugal (which costs about $500 per night) before our trip this fall got postponed due to Covid-19. This card has successfully captured and rewarded his spending while also providing us with some very useful perks and benefits. We really feel like this card offers a lot of value for a $95 annual fee.
In this day and age it is so easy to pay bills online using a credit card. I pay almost all of my bills that way now in order to get as much benefit back as possible for my regular spending. Additionally, whenever I am making a big purchase, I stop first and consider which of my cards will net me the biggest return for that purchase. After a while it just becomes second nature.
The first step to enjoying these rewards though is choosing the right portfolio of cards that provide you with the best benefits and points return categories specific to you. It is important not to get blinded by shiny sign up bonus offers for a credit card you either wont use or that doesn’t offer long term points earning or rewards potential. It’s best to have a few different cards and not put all your eggs into one basket, but not to have so many cards that you are too confused to know which one is the best to use. Balance!
All things change including how valuable a credit card is to us. Don’t forget to do an annual review of your credit cards to make sure that you are actually continuing to get enough value from each card to offset the cost of your annual fees. If you are not getting enough value, cut them loose before the next renewal and save yourself some money.