Choosing a credit card is a lot like dating; it’s all about finding the perfect match for you. From reward cards for travel to gas to cashback, how do you know what credit card best suits your needs?
Money expert Preet Banerjee said you should pick the card that is going to maximize rewards for your lifestyle.
“If you travel a lot, maybe you want those rewards for travel,” Banerjee told hosts on The Morning Show.
“Some people want cash back … Other people pick credit cards that are aligned to discounts on fuel. So if you commute a lot, you spend a lot of money. Sometimes those credit cards linked to gas discounts at the pump could be like six cents off per litre.”
Before choosing a credit card that offers rewards, Banerjee said it is important to consider how well you manage your spending. A credit card with no fees may be safer for someone who has a habit of overspending and accumulating debt.
“Reward programs reward spending,” Banerjee said. “If you have a spending problem, maybe you should err towards the side of the no fee, no frills card so that you’re not incentivized to spend more money.”
READ MORE: The top 5 credit cards in Canada for travel rewards
A credit card with an annual fee, however, may be better for a person who is responsible with their money, he said. Reward programs with annual fees tend to be more generous and have more perks because you can earn points faster.
But financial experts also warn about racking up too many points — on too many credit cards.
“Don’t get every card that’s offered to you,” said RateSupermarket.ca analyst Jacob Black in a previous Global News report. “Don’t sign up for a dozen credit cards because that will hurt your credit score.”
Should some people stay away from reward cards?
Although these rewards and discounts sound appealing, Banerjee said you should ignore those programs if you have a balance on a credit card.
“If you’re focused on reward programs and you’re carrying balances on your credit cards,” he said, “this is bad. You need to focus on paying down that balance. The best reward for you is getting rid of that balance.”
READ MORE: Reward credit cards: Best bang for your buck
Reward vs. loyalty program
A loyalty program is for customers who choose to spend the majority of their money and time at a certain business rather than another brand that is less expensive or more convenient.
Rewards programs, on the other hand, are for people who want to earn credit toward future purchases.
“There are some cards where you earn points and then you can use those points to buy different rewards whether it’s travel or merchandise on websites that they have,” he said.
READ MORE: Do loyalty programs make you spend more?
Choosing the right credit card
Banerjee said using a credit card selector is an easy way to find the best option for your lifestyle. These tools ask you questions about your financial habits and what you spend the most money on. Based on your answers, the program will make a recommendation.
At the end of the day, he said, talking to a professional is the best advice he can give for someone choosing a credit card.
Watch Banerjee and the video above to find out which credit is right for you.
— With files from Global News’ Tomasia Dasilva
amanda.pope@globalnews.ca