Consider these factors to get the most out of your credit card.

According to U.S. Federal Reserve Research, 84% of adults in the U.S. had a credit card in 2021. The banking industry offers cards with a wide range of rewards or perks to attract and incentivize customer activity so the banks can make more money. The sheer number of choices can be overwhelming, and it can be hard to decide which type of reward card to choose. Common types of reward cards:

▪ Cash back: Receive a percentage of cash back on your purchases. This can come as a flat rate on all purchases and some programs offer higher cash back rates on specific categories like groceries, gas, or restaurants.

▪ Travel: Earn miles, points, or other credits that can be used for flights, hotels, rental cars and other travel related expenses. Some of the higher end travel cards even offer sweeteners like a TSA precheck credit, airport lounge access and travel insurance.

▪ Reward points: Points earned can be spent on gift cards, merchandise, or other shopping benefits, typically through a member network.

▪ Store or brand cards: Businesses that offer a specifically branded card that offers discounts, benefits, promotions, or other rewards when used at their store. Benefits are often redeemed directly with the retailer.

To chose the right card, start by reviewing your spending trends. Take a look at your expenses and determine where you typically spend the most money. Depending on your stage of life and lifestyle, spending in certain categories like groceries, travel or restaurants can be key determinants of reward selection.

Then look at the annual fee. Many of the most valuable rewards are offered on cards that charge an annual fee. This offsets some of the benefits of the rewards. You need to do some calculations to determine the benefit of the rewards after adjusting for the annual fee.

Consider the simplicity vs. complexity of the card. Many cards offer better rewards for spending in certain categories or with certain merchants. This can often be difficult to remember or manage, especially if the categories or rewards change periodically. Some folks enjoy the challenge of getting the maximum benefit, and others are annoyed by it.

The redemption method, which is how you access the rewards you earn, should also be considered. You may prefer a statement credit for cash back, free airline tickets, or shopping credits through an online network. It is important to understand how you get to use or spend the rewards you earn.

Be sure to read the fine print and understand limitations to the rewards you earn, expiration of points, or restrictions placed on booking flights and hotels. After all, what good are the rewards if you cannot use or spend them how you like?

Other considerations:

▪ I find that simplicity is often undervalued when picking a reward card. Ease in earning and redeeming the rewards is a valuable benefit. I generally prefer cash back cards over other types if the value appears to be similar because of the simplicity they offer. It is typically easy to redeem the cash back for a statement credit or check, and you can set aside those funds and earmark them for travel, big purchases or other spending goals.

▪ Cards that offer rewards often come with a higher interest rate. If you occasionally carry a balance on your card, it likely makes sense to choose a card with a lower interest rate rather than rewards or other perks.

▪ Be sure to consider the card network associated with your card. The big four are Mastercard, Visa, American Express and Discover. Choosing one that is accepted at the places you shop is important.

▪ To maximize your benefits, you can choose multiple cards with different reward structures and use them strategically to earn the most rewards.

Lucas Bucl is a Certified Financial Planner professional and a member of Financial Planning Association of Greater Kansas City. As a shareholder of Aspyre Wealth Partners in Overland Park, he helps clients define what success means to them, and then craft and execute a plan to achieve it.

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