The 3 Keys to a Great Credit Card: Rewards, Interest Rates, and Fees

Tuesday, June 30th, 2015
Updated: June 30th, 2015
The content is accurate at the time of publication and is subject to change.

When you’re looking to add another credit card to your wallet, there are three things to remember: rewards, interest rates, and fees.

While there are plenty of other things you can focus on, these are the keys to a great credit card. There’s no need to read all the fine print and go over the terms and conditions with a fine-toothed comb if you just take a look at these three important components of any credit card. Let’s go over them one by one and see what you should look for in each.

Rewards. This is obviously the most fun part of shopping for a new credit card. Will you go for a credit card with travel rewards? These can offer frequent flyer miles, hotel points good for a free night’s stay or longer, and things like train trips, cruises, car rentals, and vacation packages. A cash rewards card offers you either a statement credit or the chance to redeem your cash back for gift cards. Points cards can usually be used for gift cards, travel credits, charity donations, or statement credits. There is plenty of flexibility built into most rewards credit cards, so you can choose the best redemption option for you. When you’re looking at rewards credit cards, remember a couple of things: the better your credit score, the better the rewards card you can get. And the second thing – don’t be afraid of an annual fee. Often, cards with an annual fee offer the absolute highest value rewards. These rewards more than pay for the annual fee. Also, most cards waive that annual fee for the first year you have the card. So don’t automatically reject a card with an annual fee, even a steep one.

Interest rates. Less fun, but still important, is the interest rate you’ll pay on your new credit card. It’s best to get a low APR credit card, in case you end up carrying a balance over from one month to the next. Theoretically, it doesn’t matter how high your interest rate is if you plan to pay your credit card bill in full each month. However, it can be hard to predict whether or not you’ll find yourself in a situation where you can’t quite cover the full amount one month. If this happens, having a low APR will pay off.

Fees. Every credit card has a fee schedule. There might be an annual fee, a fee for making a late payment, a fee for going over your limit, a fee for taking cash out of an ATM, even a fee for calling customer service or getting a paper statement in the mail. Look over the fee box and make sure you know what each of these things will cost you, if anything. Many newer credit cards are no longer charging late fees or over limit fees, at least for the first time it happens. If you think you might benefit from this, because maybe you get a little distracted or you have a lot on your plate, look for a card that won’t charge for these infractions.

When these three keys guide you, you’re sure to find the card that’s right for you.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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