1 Pitfall to Avoid When Choosing a Rewards Card

Be careful when applying for a new credit card so you don't fall into this trap.

The great thing about using credit cards is that you can get rewarded for the purchases you make all the time. Fill up your car twice a week? There may be a credit card that gives you cash back for gas. Do a lot of grocery shopping? You could get more money back on your food purchases.

But there's one mistake consumers tend to make when searching for a new credit card. And it's a pitfall you're better off avoiding.

Think about you

It's easy to be enticed by a credit card that offers generous rewards in multiple categories. But before you apply for that card, think about your personal spending needs. And, more specifically, make sure the rewards program aligns with the things you spend money on.

You may be interested in a travel rewards card that allows you to easily rack up hotel points or accumulate miles for free flights. But if you only travel once or twice a year, that may not be the best card to get.

Similarly, a credit card that offers bonus cash back on gas fill ups is great for someone who commutes to work daily or drives a lot. But if you only fill up your car twice a month, that may not be the best program for you.

That's why it's a good idea to spend some time looking through your credit card statements from the past six months before applying for a new card. Take a look at the categories you spend money in and figure out where the bulk of your spending takes place. If you see that you spend more on grocery charges than any other expense category, then it pays to find a credit card that rewards you with extra cash back on supermarket purchases.

Read the fine print

Not only should you make sure that the rewards your credit card offers are easy for you to accrue, but also make sure they're flexible and don't expire. Say you do a lot of shopping for clothing at a certain store, and you decide to open a credit card that gives you extra money back toward that shop. You may have an easy time racking up rewards, but if those rewards expire 60 days after they're issued, that doesn't leave you with much flexibility.

Do your research

There are many credit cards out there offering a variety of perks, and the choices can be overwhelming. But it's important to apply for new credit cards sparingly.

Each time you submit an application for a new card, it counts as a hard inquiry on your credit report. A single hard inquiry won't hurt your credit score very much, but multiple hard inquiries in a short period could. As such, it's important to do your research before applying for a new credit card so you choose the right one from the start -- and so you actually get to enjoy the perks that new card has to offer.