How do I determine what cards to apply for?

I would like to begin this post with an important disclaimer.  Applying for credit cards can impact your credit score, sometimes drastically.  Companies will pull your credit report to determine your creditworthiness.  When they do this, an inquiry shows up on your credit report that can ding your score.  Ultimately, you are responsible for your credit and should be sure to consider this and other factors before applying for credit cards.  In addition, if you are about to apply for a mortgage within the next year, I highly recommend that you don't apply for anything until you complete that process, assuming that you want a smooth path to approval and the best possible interest rates.  Having said these things, my goal and purposes is to help fellow consumers by sharing tips and experiences for earning and saving money with credit card rewards and programs.

Now that you're ready to begin applying for credit cards, it's time to identify cards that are worth applying for.  Not sure where to start?  I have some centsible tips.

Make sure the card you apply for earns rewards.


Every card that you apply for should allow you to earn miles, points or cash back.  Avoid applying for any card that doesn't allow this.  During my college years, I was happy to apply for a credit card for a free t-shirt.  Needless to say, that was not a fantastic benefit. 

Get the point.

Regarding points, be aware every point earning card is not created equal.  In a future post, I will discuss the importance of assigning value to points to ensure that you get the most bang for your buck.  As an example, the points I earn on the Chase Sapphire Preferred have a different value from the points earned with the 123 Rewards Visa card for Kroger stores offered by US Bank.  In a future post, I will expound on this premise.

Abide by the 2% Rule.

Generally speaking, you should apply for cards that net a minimum of 2% cash back or 2 miles earned per 1 dollar spent. For example, Fidelity offers American Express cards that meet this criteria. 

Take 5.

There are several cards in the market that offer 5% cash back on select categories of spending throughout the year.  Examples of these categories include gas stations, drugstores, movie theaters, and restaurants.  These are places that we attend regularly.  5% cash back on these purchases can really add up quickly.  I don't see a reason why you shouldn't aim to have every single one of these cards in your wallet.  I currently carry the Discover IT and the Chase Freedom.

Patience is a virtue. But...

Once you earn your rewards, you want to be able to redeem them quickly and easily.  Before applying for a card, check to see if there is a threshold of total rewards earned that you have to reach before you redeem. Also, look to see if you can redeem for gift cards, credit to your statements, or as currency on retailer websites such as Amazon.  Some credit card issuers take a bit longer to apply rewards to your account, thus limiting your ability to cash them out quickly. This doesn't mean that the card isn't worth applying for, but it's something to keep in mind.  Some issuers offer products that require a high threshold be reached before you can redeem. Know this information before applying.

See the fee.

Some rewards cards charge an annual fee, although it is generally waived for the first year.  You need to include the cost of the fee in your calculations if you want to know if a card will benefit you and help you earn and save money.  When I first entered the credit card rewards game, I was averse to annual fees.  Now, I have a few cards out of the 16 that I currently own that have fees.  It made sense to pay the fee in order to earn the rewards after I did the math.  These cards may or may not work for you, so make sure you do the math also.

Take the bribe.

Credit card issuers promise lucrative sign up bonuses to sign up for cards.  Many times these can result in hundreds of dollars worth of rewards or cash back.  Pay attention to the spending threshold that has to be met to receive the sign up bonus.  Also, make sure you know how much time you have to meet that bonus.  Credit card bonuses can net you big cash back and rewards.  I typically apply for several cards at a time so I can reap the benefits quickly.

Plan your attack. 

If you're just getting into the credit card rewards game, you want to set yourself up for success.  Research which issuers are more conservative than others.  Discover is known in the miles, points, and rewards community as a conservative lender.  Also keep in mind that some products that an issuer offers are easier to be approved for than others.  For example, it's pretty easy to get a Chase Freedom card than it is to be approved for the Chase Sapphire Preferred.  You want to plan your application strategy accordingly. I highly encourage you to read credit card forums such as this one on MyFico to learn about the habits of lenders.

I hope that you are coming to your centses and realizing how easy this game is to play with a little research.  In the next few posts, we're going to ramp things up and discuss the actual application process and what to do if you're initially declined for a product.  We are also going to delve into specific card issuers and their products and discuss how to earn and save in detail.  Add a comment and let us know how you choose what cards to apply for.