Don’t Let Your Credit Cards Punish You When They Should Be Rewarding You

“What’s in your wallet?”

You probably recognize that slogan from one of the leading credit card companies. A corny advertising gimmick it may be, but it truly is worth examining what’s in your wallet – and considering whether different types of credit cards should be in your wallet instead.

If you haven’t gone through all of your credit cards in a while, tax season is a good time to do so. It’s something worth making an annual habit. Obvious things to take account of include the interest rates you’re being charged, your credit limits, and the cash-back, mileage, and other perks your cards are rewarding you with.

Carrying a Balance on a High-APR
Card Is Always a Bad Idea

First, consider whether you’re paying a punishing interest rate. Even if you pay off your card balance every month, you never know when you may need to carry a balance for a while (or accidentally carry a balance due to underpayment). The average interest rate on personal credit cards is 11.82%, according to data reported by the Federal Reserve. If you have good credit and the APR on a credit card is greater than 10%, ask to have it reduced.

Or shop around for a card with a lower rate. Some cards offer introductory rates of as low as 0%.

Credit Card Rewards Programs Are Becoming
More Competitive – And More Lucrative

Next, are you being sufficiently rewarded for your purchases? If you’re still using a card that offers 1% cash back on purchases, you may be leaving cash on the table. Some issuers now offer 1.5% to 2% cash back on your charges. Other credit cards give special double or triple bonuses for certain types of purchases.

It used to be that credit cards offering mileage rewards linked to your favorite airline was the best option for frequent fliers. Today, maybe not. In recent years, airlines have diminished the value of miles by severely restricting the ability to use miles for flights or upgrades when you actually want to use them. Another drawback to airline cards is that they typically carry an annual fee.

If you are a frequent flier and are unhappy with your miles rewards card, you might take a look at Capital- One Venture. It offers the opportunity to earn double miles on every purchase. CapitalOne Venture comes with a $59 annual fee (waived the first year).

Spend Some Time Learning
About Great Credit Card Benefits

Unless you fly a lot, you’ll probably be better off with a rewards card that carries no annual fee. The Citi Double Cash card gives you 1% back on each purchase, then another 1% after you actually pay your charges. Effectively, it’s a 2% cash back card. The American Express Blue Cash Everyday card offers 3% cash back for supermarket purchases, 2% at gas stations and certain department stores, and 1% on everything else.

Besides rewards and interest rates, other things worth considering are whether a credit card levies foreign transaction fees, offers travel, car rental, or other insurance coverage, and provides good customer service.