Which is Best: A Credit Card with Rewards or a Low-Interest Credit Card?

There are far more credit card options today than there were 10 or 15 years ago. Rewards cards, cash back cards and low-interest credit cards are offered from nearly every financial institution, so how does an informed consumer make a decision?

Credit card rewards refer to any card that allows cardholders to earn points or cash back from their purchases. They might receive gift certificates or reward points that they can spend at various retailers, or they might just receive cash back when they have reached a certain threshold.

A low-interest credit card is one that includes a low annual percentage rate (APR). Sometimes the low APR is offered for a limited time (called an "introductory APR"), though the default and regular APRs are often low, too. So which is better: credit card rewards or a low-interest credit card?

Credit Card Management

The first thing to consider is your money management tendencies. Will you pay off the balance at the end of every month, or will you carry a balance from one month to the next?

A low-interest credit card is best when you purchase high-ticket items...Rewards credit cards, on the other hand, are great for consumers who purchase items at specific stores.

A low-interest credit card is beneficial to the latter group. If you intend to carry a balance, that low APR will reduce the amount of interest that accrues on each payment, thereby lessening the financial burden.

Rewards credit cards, including cash back, are better for consumers who pay off their balances every month. Since you won't be paying anything in interest, the APR isn't of consequence, and you won't spend any rewards you earn on rapidly accruing interest.

Spending Habits

The next thing to consider are your spending habits. Where do you like to shop? How often? A low-interest credit card is best when you purchase high-ticket items such as electronics, or when you use your credit card frequently for necessary purchases such as groceries or gasoline.

Rewards credit cards, on the other hand, are great for consumers who purchase items at specific stores. For example, if you travel frequently and need to rent a car on each trip, you might enjoy the Capital One Orbitz Visa. You'll earn more cash back when you rent from Orbitz than when you make other purchases.

Choosing Wisely

Avoid applying for a credit card just because the credit card rewards or cash back appear flashy. Instead, read the terms carefully to determine whether a low-interest credit card might be in your best interests.

You might also talk to friends or relatives who have used various cards over the years. See if you can't wrangle a recommendation for a specific card, then see how that credit card's advantages work with your money management habits.

Steve Thompson

---

Read more about Credit Cards

Read more about Personal Loans

Read more about Credit Repair

Bad credit credit cards

See more credit cards