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Let your credit card reward you

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For the conscientious consumer, credit card rewards programs are equivalent to free money. Sometimes, the perks sound too good to be true, and that’s because for many people, they are. Rewards cards only benefit you if you pay off your credit card balance monthly. “The interest rates are very high on rewards cards,” says Odysseas Papadimitriou, chief executive of credit card comparison Web site CardHub.com. “If you carry a balance, you’re going to pay more in interest than you’re getting in rewards.”

In recent years, credit card companies have upped the stakes, offering free flights or cash back bonuses for signing up. It takes time to find the card that’s best for your tastes. Do you travel often? Do you have a favorite hotel chain or store? Perhaps you prefer the flexibility of a cash-back program. There are cards for every preference, and the experts help us navigate the choices.

Before you apply

Know your score: The FICO score is the credit score most credit card issuers use when determining whether you qualify. You “don’t want to waste time applying for cards you can’t qualify for,” says Beverly Harzog, a credit card expert for Credit.com . “There’s a lot of factors that go into the score. If you have a score of 750 and up, you have excellent credit and you’ll qualify for rewards cards.” If you have a poor credit score or a short credit history, you’ll have a harder time qualifying for the best cards.

There’s no ‘one size fits all’: “Pick rewards that fit with your lifestyle,” Harzog says. “Do you need help with everyday expenses, or do you prefer getting a free trip every year? You can also pick a hybrid card where you can redeem points for gift cards or airline miles.” Some people want flexibility, others are loyal to a particular brand. Know your spending habits, and choose a card that fits you.

Don’t discriminate against annual fees: So, the card has an annual fee. But if that annual fee is going to pay for itself in bonuses or free flights, it’s worth it. “You should weigh the annual fee based on the rewards you’ll be getting,” Papadimitriou says. Harzog says the market is so competitive, you can ask companies to waive the fee. “If you have excellent credit, some companies will waive the fee for the first year, so negotiate. It never hurts to ask.”

Play the system

Get the initial bonus: Experts caution against applying for every card since having a lot of open credit cards can ding your credit score. But there’s no harm in applying for a few cards to get a cash bonus if your credit score can take it. “If you want to get a card and extract the maximum value from it early on before closing it, just make sure you’re not using your credit score in the next six months” to apply for a mortgage or car loan, Papadimitriou says.

You can also apply for more than one type of card. “Be smart. Get one card that has a versatile cash-back rewards program and another that’s good for something specific, like travel or your favorite store,” Papadimtriou adds. If you often shop at Costco or Target, get their cards and reap the benefits. Some stores give up to 10 percent discounts just for signing up. But don’t apply for cards from every store you visit. “Having more than a few cards can entice you into spending more,” Harzog says. Also, have a low-interest card for emergencies.

Maximize your cash back: Some cards, including the Chase Freedom Visa, have cash-back programs with revolving categories. Each quarter, you can earn up to 5 percent cash back on spending categories such as dining, groceries or gasoline up to $1,500 and 1 percent on everything else. It takes research to maximize your cash back. Some top picks are the Chase Freedom Visa, which offers a sign-up deal of $200 cash back if you spend $500 in the first three months. With no annual fee, it’s a good deal. For bigger spenders, the Chase Sapphire Preferred card offers 50,000 points if you spend $3,000 in the first three months. That’s worth $500 cash back. Chase will waive the annual fee for the first year.

Travel smart: Have a favorite airline or hotel? Get its card and stick with it. “Loyalty pays off, so if you have an airline you travel with all the time, you’ll reap the benefits,” Harzog says. But don’t let deals change your brand loyalty; don’t apply for a Delta Skymiles card if you’ve never flown Delta. “A lot of people think that the bonuses are so great that they’ll change their spending habits to fit the card,” Papadimitriou says. “You always revert back to your old spending habits.” If you’re traveling abroad, get a card without foreign transaction fees. The Capital One Venture Card is flexible, offering two miles for every $1 spent. Airline-specific cards, such as those for US Airways, Delta, Southwest and Continental, offer initial bonuses, some with enough points for a free ticket within the United States.

THE BOTTOM LINE Let credit card companies reward you. Choose a rewards card that complements your lifestyle. Maximize your benefits by researching initial bonuses and long-term benefits. Too busy to research? Opt for a flexible rewards program. Never carry a balance. These cards reward only savvy spenders.

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