Debt and credit

The Best Credit Card is Not Just a Credit Card

 photo single_credit_card_zpsf3c01252.jpgDecisions are always tough. People really do like to be led along. Give them a single choice, and they will happily follow it because it is an easy path.

But nobody like to be told what to do. People like to have options, even if they find it tough to choose-even if people often make the wrong choices for the wrong reasons and regret those choices later.

Welcome to the paradox of credit cards. Consumers love to have choices, but faced with so many different options, they want someone to tell them which one to choose. Well, it’s not that easy. It turns out that the best credit card you should sign up for right now is not a credit card. It’s two credit cards. Let me explain.

First, we need to look at the factors that distinguish credit cards from one another:

Interest rate: Each card offering has different interest rates for purchases, for overdue balances, for cash advance, for introductory periods, etc.

Rewards: Various cards offer different rewards for travel, for shopping at certain stores, for buying certain types of goods … and those rewards might come in the form or cash back, of credits to shop at a certain store, for travel or points that can be used in a variety of ways.

Fees: Not all cards charge users a fee, but sometimes the fee is worth it.

Benefits: There are so many benefits, and many cards offer a variety of them. For example, travel insurance or rental car insurance. Some offer security features, actually watching your activity for signs of fraud.

These are just a few of the most common and most important differences. No wonder choosing the best one is difficult.

Even choosing the best one for you, can be difficult, because you are even more complicated than the selection of credit card offers.

Why A Single Credit Card Is Not the Best

That is why a credit card is not the best choice-but two credit cards just might be. In fact, that is the very conclusion that the respected Consumer Reports has reached:

“Consumer Reports conducted a study in August 2013 that showed using two different credit cards (as opposed to one or many) can make a huge impact on the amount of rewards dollars you earn annually. If you stick to just one trusty piece of plastic, you’re potentially leaving hundreds of dollars in rewards on the table every year.”

The key is to look carefully at your lifestyle and spending habits. For instance, if you travel a lot, you might find that a travel rewards card will rack up points for a free family vacation a lot faster than the cash-back equivalent that other credit cards are offering. Loyalty to a particular airline or hotel chain might just have its rewards.

But even travelers have to eat, and if you also have a lot of hungry mouths to feed, you will greatly benefit from having a card that specifically focuses its cash-back rewards on food purchases.

Hold on, though. If you are carrying a large balance, rewards might not even be something to consider. The biggest factor that affects your finances will be the interest rate. So if you travel and have many mouths to feed, but carry a balance, your best strategy would probably be to get one rewards card and keep it paid down, while ensuring that any unpaid balance is always on the low interest card. Your next choice, in this scenario, is to decide which rewards card is worth more to your family: the travel rewards card or the cash-back-on-groceries credit card.

“It is not uncommon for our customers to come back for a second or third credit card,” says Chris Mettler, owner of CompareCards.com, one of the larger credit card comparison websites. “They look at the features they like best and sign up for a credit card, then later they realize there are some other features important to them. And it is pretty rare that any one card just happens to have all the features optimized for you and only you.”

Before even applying for credit cards, make a list of what you spend on the most. This will be important for deciding what you want to earn rewards on. And it will be equally important for deciding what you want to earn rewards for.

Then decide whether you need a card that keeps interest low or whether interest is simply not important to you. Then look at some of the features, which might also save you money. For example, if you frequently rent a vehicle, you could save a lot of money on rental car insurance if that feature is already covered through your credit card.

Spend a little time with a calculator and see which credit cards save you the most. The only thing that I can say for certain is that it is most likely not a credit card-not one single credit card-that is your best choice. Two cards are almost always better than one.

Penny Chalmers is a personal finance writer who carries at least two credit cards anywhere she goes. She writes articles like this to share her knowledge and to earn enough money to keep using those credit cards to buy both travel and groceries.

Do you have any questions? Please ask.