Have you ever thought about getting a rewards credit card? If you have, then you have probably heard about the different perks that come with having them. Indeed, rewards credit cards are good for those of us who want to experience the pleasure of having a credit card while also knowing we are going to get something in return for simply having one and using it. But, along with having a rewards credit card, there are facts you should consider while choosing the right one for you.

One of the country’s leading news organizations, U.S. World News and World Report, conducted a study that highlights what people tend to look at when signing up for rewards credit cards. Out of 1,271 rewards credit card holders, 27 percent said cash back rewards were their reason for getting the card. 45% of the people in their study said they actually redeemed their rewards in the past year. Sounds legitimate, right? I know personally, cash back rewards would be a motivating factor for me and credit card to be in the same sentence.

But the interesting thing is, while most people are earning their rewards by using their rewards credit cards, they are not reaching the full potential of the rewards they could be getting. By not researching all of the different rewards credit card offers before signing up, they don’t know the differences in reward earnings offered with different cards. In fact, 56% of people in U.S. World News and World Report’s study said they used their rewards credit cards less than once every three years. In other words, they never used their rewards credit card!

With the right knowledge about rewards credit cards and different rewards programs, you can boost your credit and earn rewards while spending money.

To know whether rewards credit cards are for you, consider the following questions:

How is your credit score? Most credit card companies are looking for candidates with a minimum credit score of 680.

Can you pay your balance every month? Remember, rewards may be in the name, but it is STILL a credit card. While you’re spending money, you will still receive a statement in the mail of what you owe. Not being able to pay your monthly balance will only hurt you.

Do you meet the bonus limits? If not, you will more than likely lose money while paying on a rewards credit card.

Now that you’ve tested yourself, you feel ready for a rewards credit card, right? Well, hold on. There’s still more knowledge for you. Before you order a rewards credit card, you need to know the difference between the three types of rewards: cash back rewards, loyalty/cobranded, and general rewards.

Cash Back

With a cash back rewards credit card, you can get your money back as statement credit, check, or direct deposit. Cash back rewards programs can be competitive, so look closely. If you choose a cash back rewards credit card on a whim, you could miss out on other great offers from different credit card companies with higher rates of rewards.

Loyalty/Cobranded

Loyalty/Cobranded rewards credit cards are used in conjunction with a specific brand. Prime examples of these rewards cards include cards from airlines and hotels. With these type of rewards credit cards, you can earn perks within a specific brand. For example, using a rewards credit card for airlines can earn you flying miles. You can even transfer flying miles, upgrade on room service, etc. Basically, with rewards credit cards from specific brands, be prepared to be offered better than usual offers for supporting a particular brand.

General Rewards

General rewards credit cards offer more variety when it comes to redeeming your money. With general rewards, you normally earn one point per dollar spent. But, this is where research comes into play: there may be better deals out there! Always do your research and make sure you are going to be getting the best deals for yourself. General rewards credit cards offer different areas to be able to earn points from, including grocery stores and gas stations. With general rewards credit cards, rewards can be earned in the form of cash, gift cards, and travel rewards. With general rewards, the field is broader when it comes to your actual rewards.

To maximize your earning with rewards credit cards, it is important to recognize where most of your spending goes in the first place. A lot of cards have different spending categories, so knowing where you spend most of your money is a prime factor in choosing the right rewards credit card for you.

It is also important to consider sign-up bonuses. This is the point where it helps to know how much you would spend regularly with your credit card. If you are one of the ones to rarely use a credit card in a three year time span, the sign-up bonuses advertised would be of no benefit to you, should you start using a rewards credit card. U.S. World News and World Reports cites the Capital One Venture card with offering a bonus of 40,000 ($400 in travel). However, you need to spend $3,000 on your rewards credit card during the first three months after you open your account. If this amount seems a bit high to you, the Capital One Quicksilver card has a spending requirement of $500 during the first three months, but the bonus is $100.

The next step is to think about point valuation when spending with your rewards credit card. Different credit card companies offer different dollar equivalents when spending, which means the monetary value of a point could be higher or lower depending on the rewards credit card you choose. For example, one rewards credit card could offer one cent as equaling one point, while another may equate two dollars equaling one point. Asking these questions and recognizing these characteristics can be huge game changers when it comes to building your points and earning more rewards. Redemption methods can vary between companies too; some companies may offer statement credit while others allow you to purchase things directly with your points from them.

Another area of rewards credit cards is annual fees and the benefits you gain. Whenever you see a rewards card with seemingly awesome perks, there is usually an annual fee to pay. As mentioned before, if you are not going to earn enough rewards in a year (to balance out the fee), then the card would really be a waste of your money. Look for a card in which you are going to adequately spend an appropriate amount of money for yourself, earn rewards, and pay the annual fee without feeling like you are backsliding in the reward process. As for benefits, baggage fee perks, auto insurance and travel insurance can save you a lot of money when you’re ready to go on vacation with your family. It’s really just about being honest with yourself and doing a little bit of math. It doesn’t hurt, I promise; especially when it comes to saving you money and getting the best rewards.

U.S. News and World Report recommends the Citi Double Cash Card because of its ability to earn 2 percent back on all cash purchases, long zero percent APR promotional period on balance transfers, limitless amount of cash back earnings, no category restrictions and best of all: no annual fees.

U.S. News and World Report offers these tips when it comes to rewards credit cards:

  • Avoid having a balance, as paying interest on your balance may diminish the rewards you earn.
  • Take advantage of sign-up bonuses, this is the fastest way to earn rewards points.
  • Know which items you mostly spend money on, and spend. HOWEVER, avoid overspending to earn rewards. This can cause you to spend more than you actually earn.
  • Take advantage of all the benefits your card offers. This tip speaks for itself.

If you really want to build on your rewards, it can be useful to use multiple rewards credit cards. For instance, you could have a rewards credit card for groceries and another rewards credit card for traveling. Building on your rewards using two rewards credit cards that are on the same platform (ex. Chase Freedom Unlimited and a Chase Sapphire Preferred) can allow you to group together points for both cards. You can also do the same using different cards from different rewards credit card companies. Using multiple credit cards can allow you to maximize on the rewards credit points; however, you must remember to take your organization to the next level. Not keeping up with your rewards credit cards can cause you to incur fees if you do not keep careful track of what you are spending and what you owe.

Another thing to take note of (and avoid) is the act of churning: signing up for rewards credit cards only to maximize on sign-up bonuses then closing your account. This is a risky move that can cause damage to your credit from unnecessary spending. Also, some companies have limitations on how fast you can close your account after opening.

Rewards credit cards are great ways to not only build on your credit, but also earn perks for your spending. With research, planning and a mind for budget, you can build your credit and enjoy the perks of spending money on a rewards credit card.