5 Things I Wish I Knew Before Applying for Rewards Credit Cards

Whether you’re 18 or 82, applying for your first credit card is an overwhelming affair. Bombarded with ads from every source imaginable, you probably opened a card with your bank and called it a day, like I did.

Unfortunately, these credit cards don’t tend to be all that rewarding, and you probably didn’t consider other options when first getting started.

While I’m well into my credit card journey now and consider myself an expert on everything card-related, I wasn’t when I started. Here’s what I wish I knew from the jump.

1. Annual Fees Aren’t Always a Bad Thing

There are plenty of credit cards without annual fees. Some of them are decent, such as the Citi Custom Cash^® Card, which has a $0 annual fee and earns 5% back on your top spending category every billing cycle (up to the first $500 spent).

However, the best benefits are reserved the cards that charge an annual fee — and boy, do those fees look scary. The Platinum Card^® from American Express, for example, charges a $695 annual fee (rates & fees) just for the privilege of being a cardholder.

That number sounds outrageous, and it certainly did to me when I first got started. But focusing on your out-of-pocket cost — without looking at the benefits you’ll receive — is a mistake.

Do I want to pay a $695 annual fee to keep the Amex Platinum card? No, but I do it because, in return, it gives me useful travel and lifestyle statement credits (some require enrollment), plus a huge variety of benefits that I’ll discuss later.

2. Every Rewards Program Has Different Values

As if earning rewards with your credit card wasn’t complicated enough, not all points are equal in value. This is super important and not inherently obvious, especially because there are so many different types of credit cards.

Hotel points are different from airline miles, which are different from cash back, which is different from a transferable point currency. Talk about a headache!

Ultimately, all of these rewards can be earned via credit cards and have varying values. I’m not talking about one being a little bit better than the other. Some cards can earn points that are worth 3 times as much as another.

Why is this? Hotels and airlines all have individual loyalty programs and set their own pricing for awards. Where 1 hotel might charge 20,000 points for a night, another program might charge 65,000 points for a relatively comparable property.

Comparing Credit Card Point Earnings

As an example, let’s compare what it looks like when spending on 4 different rewards credit cards on your purchases, including how many rewards you’ll earn and what they’re estimated to be worth. For this example, we’re spending $500 on a purchase at Walmart:

• Citi Custom Cash card: Earn 1% cash back for a total of $5 in rewards
• Capital One Venture Rewards Credit Card: 2x miles spent for a total of 1,000 miles, worth $18 based on our valuations
• Hilton Honors American Express Surpass^® Card: 3x points spent for a total of 1,500 points, worth $7.50
• Citi^® / AAdvantage^® Platinum Select^® World Elite™ Mastercard^®: 1x miles for a total of 500 miles, worth $7

As you can see, the card you choose to use will greatly impact the value of the rewards earned.

Unfortunately, I didn’t know this when I got started, so I spent quite a lot of time using credit cards, which earned me the wrong sort of points. While I try not to obsess about it too much, the value I lost in my first few years is something I’ll never forget.

3. Each Credit Card Issuer Has Its Own Rules for New Applicants

Once you realize how many credit cards there are and all the cool perks they can offer, it’s easy to start applying for as many as possible. After all, more cards mean more points, right?

Not exactly. As credit card issuers want to have you as a customer, they’re not keen on simply handing out credit cards (and their large welcome offers) to everyone all the time. That’s why unofficial guidelines such as Chase’s 5/24 exist.

Although they’re not formally published, card issuers maintain their own internal application rules as to how often they’re going to give you a welcome offer and how many cards you can have.

They’ll even look at how many other credit cards you’ve opened recently to determine whether you’ll be a good investment.

Because these rules aren’t widely proclaimed, it can be easy to miss them. This happened to me, and it meant that I unintentionally locked myself out of some of the best credit cards on the market, simply because I didn’t know better.

4. Credit Cards Do More Than Earn Rewards

I’ve already talked about the value of the points you earn with a credit card, but there’s so much more on offer than that.

Even the most basic of credit cards will give you tangential benefits simply for being a cardholder, whether that’s fraud protection or access to a travel booking portal.

Ultimately, the perks of owning a credit card can be enormous, especially when you find yourself ranging into premium card territory. This is especially true for travel credit cards, which feature a wide array of benefits to make your experience better and, often, cheaper.

What kind of benefits am I talking about? I’ve mentioned statement credits above, which can help offset the sting of an annual fee. But the non-monetary perks can be even more valuable:

• Airport lounge access
• Free checked luggage
• Priority boarding
• Airline companion tickets
• Hotel night certificates
• Hotel elite status
• Rental car elite status
• Complimentary travel insurance
• Discounts on award travel
• Delivery service memberships
• Exclusive event and ticket access
• Concierge services
• Shopping protections

5. Many Credit Card Benefits Overlap

I’ve been dealing with credit card overlap a lot in the last few years, especially as my portfolio has grown. After all, there are only so many ways that card issuers can reward you for sticking by them.

What this means is that many of my cards offer the exact same benefits. I have more TSA PreCheck/ Global Entry application credits than I can give away, redundant quantities of trip insurance, and even multiple versions of the same hotel elite status.

While this isn’t a huge issue when you’re opening new cards and earning welcome offers, it certainly becomes a problem as time progresses. This is especially true when your cards charge annual fees every year.

I wish I had thought more about this when first opening credit cards. The solution may seem obvious (just close some of the cards!), but some are no longer available should I wish to have them again.

Still, having been more judicious in my selection of credit cards in the beginning would have been helpful, especially when the annual fees come rolling around.

Final Thoughts

While I spend most of my time now either writing about (or actively using) my credit cards, there was a period when the whole world of credit seemed a mystery to me.

I’m glad to have made mistakes along the way — so I hope these tips help you, too.