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Cash, Miles, Points, or Perks?

You never carry a balance on your credit card, always pay the bill weeks before it is due, and make complete stops at every stop sign. Well, aren't you a goody-goody?

Hey, we applaud your upstanding ways. And so does the lending industry. For those who use their cards responsibly, the credit card world is your oyster (or kingdom, if you're allergic to seafood). Why not get some perks for being a pristine credit card carrier? You can earn airline miles, perfume, and even teddy bears by using your credit card.

The trade-off is that a rewards card usually does not have those low interest rate deals. That's something to consider if you occasionally carry a balance. And for those playing the balance-transfer game, earning miles or rewards for balances you transfer to a rewards card is a pipe dream. It just doesn't happen.

And don't get sucked into any rewards program that gives you more points on balances you carry. That's simply a transparent ploy to keep you in debt and paying interest. Unless you get solid gold coins for every point, any reward is not going to be worth the interest you pay to stay in debt.

Conscientious credit citizens should look for the following traits in their card:

At least a 20-day grace period. The grace period is the time between the end of your billing cycle and when your payment is due. If you have paid off your previous balance in full, during the grace period you will incur no interest charges. If you do not pay your balance in full, interest will start accruing on the amount you owe, and it will not stop until your account balance goes back to $0 again. On top of that, all of your subsequent purchases will also be subject to interest charges.

Rewards you will use. If you're going to use it anyways, why not get something back for your credit card patronage? There are reward cards available that offer airline miles, travel points (for car rentals or dollars off hotel stays), money toward college tuition, discounts on all sorts of products, and even cold, hard cash, such as our own Motley Fool Visa Card. Some of the newer rewards cards offer double points if you shop at certain grocery stores, gas stations, and restaurants. (Again, don't go on a spending bender just to rack up points.) A rewards card is great for those who pay for a lot of their purchases via plastic, and then pay off their balances every month. If you aren't sure what reward to choose, go with a card that offers cash back.

Low fees. Many reward cards carry annual fees. Sometimes you can get a lender to waive the fee by asking nicely. If you use a card that charges an annual fee, make sure that whatever benefits it offers outweigh the fee you're paying to carry the card in your wallet.

Helpful billing statements. The best lenders offer detailed billing statements on a quarterly or annual basis. Your purchases are categorized (e.g., under "restaurants" or "retail" or "ugly shoes"), and you get an analysis of your spending -- in pie charts, grids, and all manner of glossy treatments. Again, for those who rely on plastic as their main method of spending (for everything from utilities to airline tickets), an annual spending report is a nice bonus.


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