Rewards credit cards are a popular financial tool that offer more than just a line of credit. The primary allure of rewards credit cards lies in the points or cash back you can earn from your regular spending. These points can often be redeemed for a variety of perks, including travel, merchandise, or even statement credits. Essentially, using a rewards credit card allows you to get something back for your spending, making it feel like a win-win situation.
As Nate Finney, Account Services Manager at First Alliance Credit Union, recently explained on the Good Money Moves podcast, “The thing that's a little bit different with a rewards card is you're going to get an allotment of points that can go towards a benefit, or a reward, as you accumulate them, and it's all based off of how you spend using that card.”
One of the key decisions when choosing a credit card is whether to opt for a basic card with a lower interest rate or a rewards card that offers points or cash back. This choice depends on your financial priorities and spending habits.
As discussed in a recent Good Money Moves podcast episode, Jenna Taubel, AVP of Marketing at First Alliance Credit Union, shared, “A lower rate is great for those people that have some large purchases and want to have something that they can pay off at a lower rate. But the rewards cards are more for those transactional things because you want to accumulate points.”
Basic credit cards are designed for simplicity and typically feature lower interest rates, making them a smart option if you:
Alternatively, rewards credit cards can be a smart choice if you’re looking to earn valuable perks for your everyday spending and consistently pay off your balance each month. With a rewards card, you can:
Ultimately, the best card for you will depend on how you use credit. If you value lower rates and simplicity, a basic card may meet your needs. If you want to be rewarded for your spending and are diligent about paying off your balance, a rewards card could help you maximize your financial benefits.
Finding the right rewards card for you involves evaluating the different rewards programs available. Some cards offer travel rewards, while others might focus on cash back or points redeemable for merchandise. Consider what type of rewards will benefit you the most.
For instance, if you travel frequently, an airline rewards card might be ideal. On the other hand, if you prefer flexibility, a cash back card might be better suited to your needs. Additionally, be sure to check for any annual fees and whether the points expire, as these factors can impact the overall value of the card.
While rewards cards can offer significant benefits, they also come with potential pitfalls. One of the most important aspects to manage is your spending and repayment habits. This is key, as many rewards card programs do not issue points until your balances have been paid.
Nate emphasized, “If you're spending on that card, how are you gonna pay it back? Having a repayment plan is crucial for getting the most out of a rewards card.”
Always aim to pay off your balance in full each month to avoid interest charges that can quickly negate any rewards earned. Additionally, to avoid falling into debt, it’s crucial to keep your credit utilization rate below 30%. For example, if you have a $10,000 credit limit, try to keep your balance below $3,000.
Hit play to explore the pros and cons of rewards credit cards with experts from First Alliance Credit Union.
Maximizing the benefits of a rewards credit card involves strategic use. One effective strategy is to use your card for regular expenses, such as groceries and gas, and then pay off the balance monthly.
Another tip is to take advantage of sign-up bonuses and promotional offers. Many rewards cards offer substantial points or cash back if you meet a spending threshold within the first few months. Additionally, keep an eye on special promotions that might offer extra points for certain types of spending or during specific times of the year.
Lastly, make sure to use your points before they expire. Rewards card programs typically only allow you to keep your points for a set amount of time. If you don't use them before they expire, you lose them.
Deciding whether a rewards credit card is the best fit for you starts with an honest assessment of your spending patterns and overall financial objectives. Take time to review your monthly expenses to understand your spending behaviors, ask yourself:
If you have the discipline to pay off your outstanding balance each month, a rewards card can deliver meaningful value, whether that’s cash back, points toward travel, or other perks. Earning these advantages essentially lets you make the most of purchases you would be making anyway. However, if you’re prone to carrying a balance, be mindful that rewards cards often come with higher interest rates compared to basic credit cards. The cost of interest charges could easily outweigh any rewards you earn, diminishing the overall benefit and potentially adding financial strain.
When used responsibly, rewards credit cards can be powerful tools for optimizing your everyday spending. To make the most of a credit card rewards program, it’s important to:
With the right approach, you can confidently choose a card that fits your needs and supports your broader financial goals, helping you build healthy habits and maximize every dollar you spend.
First Alliance Credit Union offers a variety of credit cards designed to fit your financial lifestyle and help you make the most of your everyday purchases, including a rewards credit card.
Whether you're looking to earn points on groceries, gas, travel, or dining, our uChoose Rewards Credit Card is structured to reward you for the way you spend. Plus, with features like no annual fees, competitive interest rates, and digital tools to track your rewards, managing your credit and maximizing your benefits has never been easier.
Our rewards card not only empower you to earn valuable points that you can redeem for cool stuff or cash back, but also come with the support and guidance you expect from a local, member-focused credit union. We’re here to help you make smart credit choices, avoid unnecessary fees, and build healthy financial habits.
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