Report uncovers differences between rewards cards

These days, consumers of all borrowing backgrounds likely have a wide variety of credit card options available to them if they want to open a new account, but taking the time to figure out the distinctions between these features can make all the difference.

While many credit cards may seem as though they come with a large number of perks these days, potential borrowers will still have to do a considerable amount of work to determine which credit card application will be the best to fill out given their personal circumstances, according to new research from Consumer Reports. This is especially true when it comes to rewards cards, which often come with many different kinds of perks that may all seem to carry roughly the same value.

How best to compare
The issue with many rewards credit cards these days, particularly given the amount of improved offers now being granted to consumers of a wider variety as a result of improving credit quality nationwide, is that they are uniformly designed to be as enticing as possible, the report said. For this reason, it's not always easy for even the savviest credit card comparison shopper to discern exactly which of the myriad offers available to them will be best suited for their personal spending and repayment habits.

As a consequence, before considering any card at all, it's often better if consumers take a general accounting of their personal standing, the report said. This should include taking a look at not only how much they spend on their credit card every month (which is a very important consideration for earning rewards of any type), but also how much they contribute to their outstanding credit card balances every billing cycle.

This will help them determine not only their earnings on a rewards card, but also, given the interest rate on the account, how much it could cost them over the course of the year, the report said. Further, they should also factor in the added debt from the account's annual fee. These are both typically larger than what consumers would pay on an account with fewer benefits.

Consider sign-up perks
A great way that many lenders are now incentivizing consumers to sign up for their newly-offered accounts is by giving them significant bonuses, the report said. These can grant new borrowers as much as hundreds of dollars worth of immediate benefits on their cards, and many of these offers double the amount if certain spending thresholds are met within a few months of the account being opened.

Others, particularly those for travel, also grant consumers additional perks beyond just the rewards they can earn, the report said. For instance, because many airlines now charge passengers large fees just for checking their bags, a number of major card issuers are granting accounts that allow travelers to avoid those fees, and experts say the value of such offers should be extremely enticing to those who fly often.

"It's silly not to get an airline card with free checked baggage, because it pays for itself after a single trip," George Hobica, publisher of the airline deals tracking site, told the publication.

However, consumers using these kinds of cards should also be careful before choosing one, and closely read over all the fine print, the report said. This is because the miles they rack up for their everyday spending may come with restrictions that limit the flexibility they find in booking travel arrangements.

Credit cards and the relationship to scores
Of course, as with any other type of borrowing, how consumers handle their credit cards can have a major impact on their overall credit standing, the report said. For instance, many consumers may wonder whether they have too many credit cards, or the effect that their various outstanding balances have on how lenders view their creditworthiness.

For these reasons, it's important for borrowers to approach any new account with caution, and weigh exactly how doing so will affect not only their ability to spend, but all aspects of their credit profile, the report said. Further, it might be a good idea to take the time to assess whether their standing is as healthy as it should be.

One particularly effective way you can do this yourself is by ordering a copy of your credit report. This will give you the ability to potentially identify any unfair markings that may have damaged your credit score. By working with a credit repair law firm, you may be able to have these entries cleared from your profile.