- Centurion Member
- Posts: 138
- Joined: Sat Jul 12, 2014 7:38 am
- Location: Atlanta, GA
To me, the primary features of a card are:
- No annual fee
- Low interest rate.
The problem with the annual fee is that, when you're talking about rewards, your percentage of reward is typically so low that it'll take a good bit of spending to just get you over the hump of the annual fee.
You can do the math of a 1% vs 2% cash back card with the 2% having $100 annual fee.
- 1% you're getting cash back on day 1 of spending.
- 2% w/ AF you have to spend $10,000 before you really earn your first 2% cash back
Now, maybe the annual fee is less or maybe it's more but, with an AF, you still have that hump you have to get across. Just do the math on it. In my example above the 2% card is more like: 2% on all purchases over $10,000 and no annual fee. That doesn't sound quite as enticing, though. Just do the math on it.
Personally, I don't want to be bothered with annual fees. That was fine in the 1980s, not now. I understand them on charge cards (Amex) but, even then, I have a hard time justifying the charge card (vs a fee-free Amex from a bank).
With regards to APR: I think it matters. It's another one that's easy to gloss over with, "If you pay it off every month then the APR doesn't matter." That's true, in a strict sense. So, if the APR was 100% would you still take it? It's a hypothetical but there's a point where you realize, "Wait - I may be caught with my pants down one month on it." Maybe you forget to pay or maybe something comes up and you're just short on cash. The point is, it's expensive money and while you can play out the grace period, it's being targeted at you as an "everyday" card - thus the whole rewards deal. They want you putting everything on that card and month-to-month you may be fine. One month you may be in the middle of a job change or moving or something and it catches up to you and a high APR card can wipe out a good bit of those rewards with a single month of interest, depending on the balance.
As others have said, it depends on what you're looking for and how you live. There are some people that will do whatever it takes to squeeze every ounce out of coupons at the grocery store. These people are amazing in that they can buy a week or two of groceries and, with all the coupons and the deal stacking, end up paying less than $20 or even get money back on the deal. The thing is, it's a full time job to organize it and, often, they'd be further ahead by just getting a regular job and using coupons like the rest of us (kind of when the opportunity strikes us) or not using them at all.
I think the same holds true in credit cards with rewards. There are people who really do what they can to squeeze every ounce of rewards out of cards from using credit cards to buy gift cards to having the art of applying down to where they maximize the sign-up bonuses (granted, not what you were asking about). I think it all depends on your level of wanting to deal with it. To be clear, I'm not faulting those who do it. It's just not me.
For me, the Discover rolling categories works well. I can remember: "Oh, buy all gas on Discover this quarter," or, "pay with Discover at restaurants this quarter." I don't want to be bothered with, "use this card at this establishment but only on Tuesdays to maximize your rewards." That's just me, though. Normally I'm "pay with cash" guy. Discover alters that just a bit with their rewards.