Published in: Credit Cards | Aug. 28, 2019
5 Prerequisites to Getting a Rewards Credit Card
By: Lyle Daly
Want to start earning rewards? Here’s what you need before you apply.
Rewards credit cards have become incredibly popular. When you’ve seen some of the card options on the market, it makes sense that you’d want one of your own. You’ll have the opportunity to start racking up cash back or points that allow you to travel for free. Who could say no?
A rewards card can provide you with a ton of value, but that doesn’t mean you should apply for one on a whim. Before you apply, there are a few prerequisites you should meet to ensure that getting the card is a smart decision.
1. A good credit score
Although you don’t need a good credit score to qualify for a rewards credit card, you do need one if you want to qualify for the best of the best.
Credit card companies reserve their top cards for consumers with good or excellent credit scores. The exact definition of good credit isn’t set in stone, it typically corresponds to a FICO Score of 670–720. An excellent score is anything above that.
You’re more likely to get approved for the cards with the highest rewards rates and the biggest sign-up bonuses if you have good credit. If you don’t have a good credit score, focus on improving that first.
2. No credit card debt
You should almost never get a new credit card when you already have credit card debt. The one exception is a balance transfer card, as these often have zero-interest periods you can use to pay down that debt without accumulating more interest.
But there’s no reason to open a rewards card if you’re dealing with credit card debt. You’ll most likely spend more and end up with another credit card balance you struggle to pay off.
When you’re in this situation, aim to eliminate your debt in full. That will save you much more money than you’d ever earn through credit card rewards.
3. Enough regular expenses to earn the sign-up bonus
Most rewards cards have sign-up bonuses that give you an extra incentive to apply. The typical bonus has a minimum amount that you must spend within a set timeframe. For example, a card could have a 50,000-point bonus that you receive after spending $4,000 in three months.
Not every bonus works like this, but if you’re considering a card with this type of bonus, compare your monthly expenses to the spending minimum. It doesn’t make sense to get a card with a bonus requirement of $4,000 spending in three months if you only spend $1,000 per month.
Don’t get blinded by a bonus opportunity. If you need to spend more than usual to earn a bonus, it’s costing you money.
4. An emergency fund
Emergency expenses happen from time to time. It’s not a matter of if, but when. That’s why everybody needs a solid emergency fund. Otherwise, you’ll need to go into debt any time you have an unplanned expense.
If you haven’t been able to build your emergency fund yet, work on that instead of credit card rewards. You don’t necessarily need to save up the usual recommendation of three to six months’ of living expenses before you go near any rewards cards. But $500–1,000 is a good place to start.
5. Stable income
Every credit card application will ask you about your income. It’s not just something credit card companies want to know; it’s the law.
While you don’t need a high salary to qualify for most cards, you do need some form of stable income. Without that, you’ll have a tough time getting approved.
Even if you could get approved, a rewards card doesn’t do you much good if you can’t pay off what you charge.
The right time for a rewards card
It’s natural to be excited at the prospect of earning rewards on your spending. Just make sure you’re not putting the cart before the horse. If you meet the prerequisites above, you’ll ensure that you’re in a stable financial situation. And that you can make the most of a rewards card.
Our #1 cash back pick has a surprise bonus
This may be the perfect cash back card! That's because it packs in $1,148 of value. Cardholders can earn up to 5% cash back, double rewards in the first year, and avoid interest well into 2020. With such a deep bench of perks you'll wonder how this card packs in a $0 annual fee. Best yet, you can apply and get a decision in two minutes. Learn more with our in-depth review.