Interest Rates vs. Rewards: Which Should You Focus on When Choosing a Credit Card?

There may come a point when you decide to add a new credit card to your personal mix. Maybe you're looking to increase your total credit limit. Or maybe you're unhappy with an existing credit card you have and are looking to replace it.

Recent research from The Ascent shows that 64% of Americans say that credit card features like interest rates and rewards are more important than trust in the credit card issuer when considering a new credit card. The question is, of those two factors, which should you focus on more?

How likely are you to carry a credit card balance?

It's important to sign up for a credit card that offers great rewards, like extra cash back on everyday purchases. The right rewards program could really put a lot of extra money back in your pocket, making it easier to manage your expenses on a whole.

The Ascent found that cash back credit cards are the most popular type among consumers. And 68% of those surveyed said they have one of these cards. It especially pays to find a cash back credit card that offers bonus cash in categories you tend to spend a lot of money in, like groceries or gas.

At the same time, you definitely don't want to overlook the interest rate attached to your new credit card. The higher it is, the more money a carried balance is going to cost you.

That said, when it comes to choosing which feature to prioritize, it pays to consider your personal history of credit card usage. If you've had credit cards in your name for more than a decade and have never once not paid your bill in full, then you may want to put rewards ahead of interest. If you're someone who's unlikely to wind up carrying a balance forward, then the interest rate on your credit card may not matter so much (though you should definitely be aware of what it is).

On the other hand, if carrying a balance forward is something you do often, then interest rates should trump rewards when it comes to getting a new credit card. As nice as it may be to score 3% cash back at the gas pump or grocery store, if you're looking at one credit card with a 19% APR and another card with a 24% APR, you might lose a lot of money by opting for the latter when you carry a balance, even if that card rewards you more generously.

Assess your choices carefully

If you have a decent credit score, then you might have dozens of credit card options to choose from once you decide to add a new card to your personal mix. You may, depending on your personal circumstances and history, decide to prioritize credit card rewards over interest rates or vice versa. But ultimately, both should be a factor in your decision to apply for a credit card. And you should absolutely make certain you understand what both entail before submitting that application.