It can feel frustrating when a friend books a free week-long trip using points while you're still using a card that hasn't given you much in return. With so many options available, from airline rewards to cash back offers, it is completely normal to feel paralyzed by the choices. The good news is that finding a card that aligns with your values and your financial roadmap is easier than you might think.
Start with your credit score
Before you choose a card, the issuers are deciding if they should choose you. They do this by looking at your credit score. This is a single number, generally falling between 300 and 850, that quantifies how well you handle credit.
Several factors impact this number:
- Do you pay your bills on time?
- How much do you currently owe on loans?
- How far back does your credit history go?
- Do you have a balance on one or more credit cards?
- Have you opened multiple new credit accounts recently?
Generally, credit cards require a score of 700. However, some higher-end cards may require scores over 740. It's also worth noting that a higher score might help you secure a lower interest rate on your balances.
Checking your score
You can check your score for free through many banks, credit unions, and websites. When you check your own score, it is considered a "soft inquiry" and will not affect your number. However, when you apply for a card, the issuer makes a "hard inquiry." This could drop your score by a few points, but the impact is usually negligible and typically drops off after a year or so.
If your score is currently under 700, you might have fewer options. In this case, check with your current bank, as they may have looser requirements for existing customers. You could also look into a secured credit card, which uses a cash deposit to secure the account.
Select the perks that fit your life
Most rewards programs fall into three main categories: General points, Specialty, and Travel. You should review these to see which one fits your spending habits best.
General points
- Type of offer: Cash back or flexible points for various perks.
- Perks included: Usually a fixed percentage of cash back on all purchases, or specific amounts for categories like groceries, restaurants, or rental cars.
- Best for: People who don't travel often but want to earn rewards on everyday spending at a variety of businesses.
Specialty
- Type of offer: Rewards tied to a specific retailer or company.
- Perks included: Discounts on products, early access to events, or services like free shipping.
- Best for: People who frequently shop at a specific store or make large, infrequent purchases from a specific company.
Travel
- Type of offer: Rewards for airline tickets, hotel stays, TSA PreCheck, and other travel costs.
- Perks included: Seat upgrades, companion tickets, lounge access, priority boarding, and free checked bags.
- Best for: People who travel often for business or leisure.
Be sure to check for restrictions. Do points expire? Are there blackout dates? You should also look at signup bonuses, such as 10,000 points for opening an account or 5,000 points annually. These often require you to spend a certain amount to qualify, but they can be a great way to jumpstart your benefits.
Look for hidden benefits
Many cards come with perks that aren't advertised in big bold letters. These "hidden" benefits can be incredibly valuable. For example, some cards provide insurance coverage if you use the card to pay for a rental car. Others might offer fee waivers for foreign transactions or early access to concert tickets. You can find these details in the cardholder agreement.
Review the fees and terms
It is important to do the math on fees. Cards with annual fees often offer more robust rewards, like concierge services or lounge access. You need to calculate if the value of those extra rewards outweighs the cost of the fee.
You also need to look at interest rates. If you carry a balance, the issuer charges interest, which is essentially the cost of borrowing that money. If you pay your bill in full every month, the interest rate is a non-factor. However, if you routinely carry a significant balance, you should research rates carefully.
Use your points wisely
While watching your points balance grow is satisfying, points actually lose value over time due to inflation and program changes. Unless you are saving for a specific bucket-list trip, most experts advise using your points soon after you earn them. This is especially true if they have an expiration date.
Some cards also offer value multipliers. For instance, depending on the card, you might get 1.5x the face value of your points when you use them on qualified purchases. This is a smart way to get even more out of your spending.
The Facet difference
At Facet, we believe your financial life is about more than just credit scores and interest rates. It's about ensuring every financial decision supports the life you want to live. While credit cards are a useful tool, they are just one part of your broader financial roadmap.
Our team of CFP® professionals works with members to look at the whole picture - from cash flow to retirement goals. We don't sell products or earn commissions on the cards you choose. Instead, we offer a flat-fee membership that focuses on providing objective advice to help you reach your full potential. Whether you're optimizing rewards or paying down debt, we're here to guide you with calm confidence every step of the way.
