Every credit card has a value, whether it’s a rewards credit card, low-interest credit card, or secured credit card. The value may be in the form of getting cash back, points or interest savings — benefiting cardholders with different needs.
Still, the value within these credit card categories can vary drastically, with some being more rewarding than others.
Often, cardholders are reluctant to get a new credit card, even when it doesn’t offer the best return on their spending or are unaware of their credit card rewards’ actual value, leading to a missed savings opportunity.
The RATESDOTCA credit card comparison tool breaks down your monthly spending to match you with the most rewarding card for your unique spending habits. You can also see the estimated year-over-year value of your credit card.
Here are a few simple scenarios illustrating how different cardholders use their credit cards and why their payment preference matters:
Understanding your spending habits can help you earn more rewards and save money.
Meet Sam:
Sam has young children and routinely shops for groceries and subscribes to meal kit services — one of their many recurring bill payments. Their spouse is added to the account as an additional cardholder to earn rewards as a family.
Meet Taylor:
Taylor is a homebody who enjoys playing video games, watching movies, and staying up to date with the latest technology. Taylor subscribes to all the streaming services available. You name it; they’ve got it. Taylor regularly shops with a credit card and gets $200 in rewards each year.
Sam and Taylor share the same monthly costs overall; however, their spending habits are quite different. Here is a breakdown of the rewards they would earn:
*The RATESDOTCA Best of Finance methodology assumes the cardholder spends an average of $2,000 a month on their card to determine the first-year value. The calculation includes all welcome bonuses and promotional offers at the time of publishing.
**The annual reward value excludes any welcome bonuses cardholders may receive in their first year of membership.
Sam earns more rewards than Taylor because Sam spends the most money within the card’s accelerated earning categories, groceries and recurring bill payments. Taylor spends more broadly and may earn more rewards with a credit card that offers a higher accelerated rate for recurring bill payments.
If you break down your monthly spending into the typical reward categories that credit cards offer, it can help you find the right credit card to maximize your rewards.
Cardholders can easily dismiss a credit card with an annual fee when there are so many excellent credit cards with no fee.
Meet Cameron:
Cameron is a 42-year-old bargain hunter who has always been money-conscious. Cameron shops around before making any significant financial decision and adheres to a budget rigorously. Cameron understands that sometimes you must spend money to save money and uses a credit card with an annual fee.
Related read: Are Credit Cards with Annual Fees Worth It?
Meet Kaden:
Kaden is a hardworking 27-year-old renter who dreams of owning a home and saves every penny. Not seeing the point in paying extra fees, Kaden regularly declines offers for no-fee credit card upgrades. Kaden acknowledges the credit card with an annual fee offers a higher percentage of cash back for every dollar spent but is also aware it comes with another expense.
Cameron and Kaden spend the same amount of money each month, but Cameron’s card has an annual fee. Here is a breakdown of the rewards they would earn:
*The RATESDOTCA Best of Finance methodology assumes the cardholder spends an average of $2,000 a month on their card to determine the first-year value. The calculation includes all welcome bonuses and promotional offers at the time of publishing.
**The annual reward value excludes any welcome bonuses cardholders may receive in their first year of membership.
Although Cameron’s card has a $99 annual fee, they earn more cash back than Kaden, whose credit card has no fee. Cameron’s card offers a better return on spending even when no promotions or welcome bonuses apply.
Credit cards with annual fees often offer more generous incentives, including bigger welcome bonuses and better insurance coverage. For those who use their credit card frequently, the return on spending can outweigh the annual fee’s cost.
Cash back rewards are straightforward. Cardholders get a percentage of each dollar they spend. Travel rewards cards can be more complex, with customers earning several thousand points per year to redeem for flights, vacations, or merchandise. Still, travel rewards credit cards offer the best value overall.
Meet Jamie:
Jamie is a 25-year-old young professional living in downtown Toronto who uses a credit card for nearly all purchases and pays the statement in full each month. Jamie has had a credit card since starting university and has a growing credit score. Jamie is mindful of spending and chooses a top-tier travel rewards credit card to maximize rewards — an addition to the no-fee card already in their wallet.
Meet Alex:
Alex is a 32-year-old newlywed living in the GTA and uses a credit card regularly, usually paying more than the minimum payment due each month. Alex has been using the same credit card “forever” and doesn’t pay close attention to the rewards accumulating on their account. Alex considers the rewards a ‘happy little bonus’ each year.
Jamie and Alex spend the same amount of money each month across the same categories. Here is a breakdown of the rewards each would earn:
*The RATESDOTCA Best of Finance methodology assumes the cardholder spends an average of $2,000 a month on their card to determine the first-year value. The calculation includes all welcome bonuses and promotional offers at the time of publishing.
**The annual reward value excludes any welcome bonuses cardholders may receive in their first year of membership.
Jamie and Alex both have credit cards with $120 annual fees, though Jamie’s card offers a greater return on their spending.
Travel rewards cards usually have flexible rewards programs. Though, cardholders will always get the best value for their points when redeeming for travel-related options. Cardholders may be able to redeem their rewards for statement credits, merchandise, or other cash-equivalent options — albeit for a lesser redemption value.
Cardholders can maximize rewards by using the right credit card to match their spending style.
Consider the following details:
The best way to maximize rewards is by using a primary credit card (with an annual fee) and a secondary credit card (with no fee). Paying with the card that offers the best return on spending can ensure you are always getting the most rewards for your purchases.
Many people use the same credit card until their bank offers them an upgrade, and still, this may not be the best choice for them. Sometimes it’s out of misguided loyalty or an oversight, but the card might not fit their needs.
Related read: Is It Time to Say Goodbye to Your Starter Credit Card?
Here are some common credit card myths:
Change can be hard but finding the right credit card is easy. Compare credit cards at RATESDOTCA to find your best match and maximize your rewards.
Rates, product information, and reward estimates are subject to change at any time and do not constitute financial advice. This post was not sponsored. The views and opinions expressed in this review are purely those of RATESDOTCA. Information in this article is accurate as of the date of this posting, March 24, 2021. Read our full disclaimer.