Tips for Avoiding Common Mistakes When Choosing a Credit Card Rewards Program

In our daily lives, we are inundated with a constant stream of credit card offers. Whether it's the enticing promise of saving 10% by opening a store card or the allure of a pre-approved credit card, the choices can be overwhelming. But how do you determine which credit cards are genuinely worth considering? Here are some tips from 7 On Your Side to help you avoid common mistakes when selecting a credit card rewards program:

1. Beware of Store Loyalty Cards: Store loyalty cards may seem tempting at first glance, but they often come with limitations. Nick Ewen, director of content with The Points Guy, advises caution when considering these rewards cards. "Generally speaking, we would advise against those rewards cards," says Ewen. "They tend to be very specific, very niche. Obviously, if you are a diehard shopper, one of these locations where you're going every week or every couple of weeks, you're spending a whole lot, and you really do value those rewards, those discounts that you get - of course, feel free to do it." Before jumping into a store card, evaluate how frequently you shop at that store and compare the benefits to those offered by your everyday card.
2. Explore Rotating Offers: Keep an eye on your existing credit account for rotating offers. Check it regularly for special cashback deals or discounts from stores you already planned to shop at. You might find lucrative offers without the need to open a new credit card.
3. Don't Be Lured Solely by Signup Bonuses: Flashy signup bonuses for new credit cards can be tempting, but it's essential to read the fine print. Ensure that the initial offer and ongoing benefits align with your spending habits and the type of rewards you want to earn. As Ewen advises, "Make sure that the card - the initial offer, as well as the ongoing benefits, including the bonus spending, the earning rates you have on your spending - aligns with the type of purchases that you're making and the type of rewards that you want to earn."
4. Consider the Impact on Your Credit Score: Adding more credit cards to your wallet can have a temporary impact on your credit score, typically causing a drop of 5 to 10 points. This, in turn, could lead to higher interest rates on new car loans or mortgages. However, it's essential to note that having multiple accounts can benefit your credit score in the long run. A history of multiple accounts with a flawless payment record can improve your credit score over time. Just be mindful not to apply for too many cards simultaneously and only spend within your means.

Choosing the right credit card rewards program requires careful consideration and a clear understanding of your spending habits and financial goals. By avoiding common mistakes, you can make informed decisions that benefit your financial well-being.

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