5 Features to Look at When Choosing a Rewards Card

Knowing which features to prioritize makes it much easier to find the right rewards card.

The top rewards credit cards have a lot to offer. On the one hand, this is good for consumers, because more benefits make rewards cards more valuable. On the other hand, it also means that choosing a card is more complicated. There are so many features to sort through, and you may be asking yourself which of them really matter.

You probably don't want to spend all day comparing every detail of one card with another. To simplify the process, you just need to know which features are the most important.

1. Rewards rate

A card's rewards rate is how much it earns on purchases. Some rewards cards offer the same flat rate, such as 1.5% or 2%, on purchases. The type of purchase doesn't matter with a flat-rate rewards card. Other cards offer higher rates in bonus categories and a lower, flat rate on non-bonus spending. For example, a card may offer 4% on gas, 3% on groceries, and 1% on everything else.

The key is to find a card with a rewards rate that works for you. If you have a few big monthly expenses, look for a card with bonus categories to match. If you think a flat-rate card works best for your budget, then pick a card that will earn a competitive amount on purchases.

2. Redemption options

Redemption options are how you can use your card's rewards. With cash back credit cards, this is fairly simple: You're earning cash rewards on your purchases, which you can redeem as a statement credit on your credit card bill. Depending on the card, you may also be able to redeem cash back as a deposit to a bank account or request a personal check.

Other types of rewards cards, and in particular travel credit cards, offer more complicated ways to redeem rewards. For example, a travel card may let you use your points to book flights through a frequent flyer program.

Review how redemptions work for any rewards cards that you like. The card you pick should have rewards that you're confident you can use.

3. Sign-up bonus

A sign-up bonus is an offer for new cardholders to earn additional rewards. The most common type of sign-up bonus is a set amount you receive after you spend enough money with your new card, such as 25,000 points for spending $1,000 within three months. There are also sign-up bonuses that offer a higher rewards rate for a limited time. An example of that would be a card that offers 5% back at gas stations and drugstores, but only for the first six months.

You can get considerable value from the best sign-up bonuses, so it's smart to compare the bonuses offered by different rewards cards.

4. Fees

Everything else on this list is a benefit, but fees determine how much your rewards card costs you. The first fee to look at is the annual fee. Rewards cards with annual fees tend to have more benefits. As you compare credit cards, you'll need to weigh the value of each card after accounting for its benefits and its annual fee. If you don't want to pay anything for your credit card, there are quite a few great no-annual-fee cards available.

International travelers should also take note of whether cards have a foreign transaction fee. This will make every trip outside the United States more expensive. If you don't travel abroad, a foreign transaction fee isn't much of an issue (although it is possible to incur foreign transaction fees while shopping from home).

Not all fees are a big deal. Most credit cards charge certain avoidable fees, with balance transfer fees and cash advance fees being two common examples. If you don't expect to make any balance transfers or cash advances, then those fees shouldn't influence which card you pick.

5. Spending credits

If you're open to more expensive rewards cards, you'll see some that offer spending credits. A spending credit means your card issuer covers you on a certain type of purchase up to a set amount. Say you find a card with a $250 annual travel credit. That means you'll receive a credit on your first $250 per year in travel purchases.

Spending credits can help balance out a card's annual fee. If the card above had a $400 annual fee, then after subtracting the $250 travel credit, it would really cost you $150 per year. That's only the case if you're sure you can use the spending credit, though.

It can often feel like rewards cards have a near-endless list of features. As you look for a card, start by focusing on the features listed above. They'll help you narrow down your list and find the credit cards that are the best fit.