For millions of Americans, picking a favorite credit card and sticking with it for more than a decade or longer can sometimes mean missing out on richer bonuses and perks being offered by various companies.
A new CreditCards.com survey found that 25 million consumers haven't changed their favorite credit card in at least 10 years and another 20 million have never changed their go-to credit card. With the survey finding that the No. 1 thing people look for in their credit cards being rewards, TODAY financial editor Jean Chatzky offered tips on Thursday on how to make credit cards work for you and whether it's worth making a change.
If you're a big spender who puts a least $1,000 a month on credit cards, you can get back cash or rewards worth a few hundred dollars a year by making the change to a new card with a higher rate of return. However, if you only travel a few times a year and fly coach, frequent flier programs are making it more difficult to earn free tickets. Delta, United, Southwest, JetBlue and Virgin America are now basing the points you earn on how much you paid for your plane ticket.
Instead of signing up for a card with a frequent flier program, Chatzky advises to go for one that gives you cash returns. Also, if you travel frequently, you may want to get a specific card aligned with a particular hotel chain or airline, but the key is to stay flexible. Another key is to get a card right before you making a big, planned purchase like furniture or a new appliance, so that you can hit the spending threshold that triggers the cash-back bonus.
There are a handful of credit cards that give you 2 percent back on any purchases, so if you are the type of user to get a card and stick with it for a while rather than gaming the system by constantly rotating your primary card, Chatzky outlined several potential options.
- Citi Double Cash: The card gives 1 percent back on any purchases and 1 percent when you pay with no restrictions, no annual fee and no earnings caps.
- Discover It: This card offers 5 percent rewards on certain categories each quarter plus 1 percent back on everything else. At the end of the first year, you get double your total reward, guaranteeing at least 2 percent back, and there's no late fee on the first late payment and no annual fee.
- American Express Blue Cash Preferred: If the bulk of your spending on your credit card is in the grocery store, Chatzky advises this card is the way to go. It gives 6 percent back on up to $6,000 spending in a year, meaning you could get $360 back as a statement credit if you spend an average of $115 per week on groceries. It carries a $75 annual fee, but you get a $150 statement credit if you spend $1,000 on the card in the first three months.
- Chase Sapphire Preferred: If you spend $4,000 in the first three months, you get 50,000 bonus points. You earn two points on travel and dining purchases and one point on everything else, and you can transfer your points to 11 different frequent travel programs, including United, Southwest, Virgin Airlines and Marriott, and you can also convert points to cash. There is no annual fee the first year, then it's $95 afterward.
- Capital One Venture Card: You get a sign-up bonus of 40,000 miles if you spend $3,000 on purchases in the first three months, giving you $400 in travel bonus money to spend when you want. You get two points for every dollar spent with no annual fee the first year, and $59 after.
- Barclay Card Arrival Plus World Elite Mastercard: Similar to the Capital One card, you get 40,000 miles once you spend $3,000 in the first three months and you earn two points per $1 spent. Points can be turned into statement credit for travel, and when you redeem your miles you get 5 percent of them back to start building again. There's no annual fee the first year, and then it's $89 a year.
- Starwood Preferred Guest card from American Express: You can use points for rooms at Starwood hotels and have the option to transfer points to several airline programs with a 25 percent bonus. If you transfer 20,000 points into an American AAdvantage account, you get 25,000 miles. You get five points for every dollar spent at Starwood hotels and one point on everything else. It has no annual fee the first year and then is $95 a year.
In the past, if you had iffy credit, getting a quality rewards card was often difficult, but that is changing, according to Chatzky. She recommended two cards for those who have so-so credit.
- Discover It Secured: A secured card is one where you make a deposit with the issuing bank that becomes your credit line (minimum $200 up to $2,500). These cards don’t typically have rewards, but this one does, offering 1 percent back for every purchase, 2 percent back for purchases at restaurants and gas stations, and double cash back after one year with no annual fee.
- Capital One QuicksilverOne Cash Rewards Card: This card only requires average credit, meaning you either don’t have much of a credit history or you’ve defaulted on a loan in the past 5 years, but it gives you 1.5 percent back on every purchase with a 0 percent interest rate until November 2016 (23.24% after that). There is a $39 annual fee.
If you have a credit card balance you have to pay off, rewards cards are not the best option right now. Paying off your balance at an average interest rate of 14 percent is going to put more money in your pocket than any rewards you could possibly rack up, according to Chatzky. For those looking to transfer a balance to a 0 percent interest card, make sure you meet the deadlines, as many cards require you transfer your balance within 90 days of opening the card. Also check to see if there is a fee for transferring the balance.
For those looking for a window of time to pay off a credit card balance by transferring to a new card, Chatzky had three recommendations.
- Chase Slate: This card has a 0 percent interest rate for 15 months (13.24 – 23.24% after). No balance transfer fee for the first two months. No annual fee.
- Citi Simplicity Card: 0 interest for 21 months (13.24 – 23.24% after) with a three percent balance transfer fee and no annual fee.
- AmEx EveryDay: 0 percent interest for 15 months (13.24 – 22.24% after), a 3 percent balance transfer fee and no annual fee.
Finally, if you've decided to make the switch, there is the question of what to do with the existing cards in your wallet. Chatzky advised that if you're not applying for a mortgage or a car loan in the next six months to close one at a time, but be careful about closing cards you've had the longest because it can lower your credit score.
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