Rewards credit cards are worth it if they will save you more than they cost you, all things considered. The best rewards credit cards are worth more than $1,000 in savings for the average person over the first two years of use, after annual fees. But you need good or excellent credit to get the most worthwhile rewards cards. Things aren’t as clear-cut for people with lower scores. In addition, rewards credit cards are only worth it for purchases that you can afford to pay off fully by the due date each month. Credit card interest rates are much higher than credit card rewards rates, so it’s best to use a low interest card for balances that you’ll carry from month to month.
When determining if a rewards credit card is worth it or not, you have to weigh the worth of the rewards against the cost of the card. If the card has no annual fee and you plan to pay the bill in full every month, it’s pretty easy to decide the card is worth it. However, you’ll often get the best rewards and biggest signup bonuses from cards that do have annual fees. In that case, you just have to crunch the numbers to make sure you’ll get your money’s worth.
Regardless of which rewards card you choose, be sure to understand how you can earn rewards most efficiently. Some cards have higher rewards rates for specific categories, and some give a flat rewards rate that you earn on all purchases. The fastest way to earn credit card rewards is through signup bonuses. Many of the top rewards cards come with signup bonuses that you can get for meeting a minimum spending requirement in the first three months. The signup bonuses are usually worth several hundred dollars, enough to cover the cards’ annual fees for years. And you can get them for spending money you were already planning on spending.