By: Odysseas Papadimitriou, CardHub.com
So you’re one of the lucky few to maintain excellent credit throughout the “Great Recession.” Nice work! We all know how difficult the last couple of years have been and that it’s been virtually impossible for many of us to maintain our pre-recession credit standing. In fact, a quarter of the people in the country have bad credit, according to FICO. Things surely haven’t been easy. That’s why you need a reward for all of your hard work and perseverance. What kind of reward, you might ask? The best credit card for excellent credit, of course. You’ve worked hard for your personal finances over the years, now it’s time to make them work hard for you.
But which of the myriad of options available to you should you choose? Well, two of the most popular features on credit cards for excellent credit are “No Preset Spending Limit” (NPSL) and rewards programs. But are these features right for you? Let’s find out:
No Preset Spending Limit (NPSL)
Perhaps you’ve heard of credit cards that don’t have spending limits. Well, NPSL cards aren’t them, but they’re about as close as you’ll get. Many people believe NPSL to mean limitless, but I’ll let you in on a little secret: limitless credit cards don’t exist. NPSL cards, like any other type of credit card or charge card on the market, have limits.
What sets them apart from typical credit cards is that users never know what the limits of their NPSL cards are. NPSL card limits change, often from month to month, based on economic trends as well as your history of usage and payment. Issuers don’t disclose them, both because they routinely change and to protect the myth of unlimited spending that spurs the popularity of their products. That’s why World MasterCard credit cards, Visa Signature credit cards, Chase charge cards and American Express charge cards are some of the most popular credit cards among consumers with excellent credit even though no one using them knows exactly how much they can charge in a given month.
When using one of these cards, you also never know if a large purchase will be approved or what effect normal usage will have on your credit score. In fact, NPSL issuers hide their products’ true limits from credit bureaus, either by reporting arbitrary substitute limits in their stead or by reporting nothing at all, according to a CardHub.com NPSL Card Study. Since a credit score is derived from credit report information, deceptive issuer reporting practices can lead to a false credit score. And since issuer reporting lacks uniformity, it’s often difficult to impossible to determine the exact effect an NPSL card will have on one’s credit standing.
Therefore, you should exclude NPSL cards from consideration for your excellent credit reward.
Rewards Programs
Rewards programs come in all shapes and sizes, and unlike NPSL, the question isn’t whether you want the feature or not, but is instead what type of rewards you should get? This is because you must pick the right type of program for your lifestyle in order to truly maximize your rewards. The first question you must ask yourself in determining which kind of rewards to get is, ‘Do I travel often?’
Travel Rewards
If you accumulate at least 20 hotel nights or 20,000 air miles per year, a travel rewards credit card is right for you. The reason we recommend travel rewards only for heavy travelers is because frequent redemption is necessary to minimize the risk of your credit card company suddenly changing the number of points or miles required for a particular perk. Brand loyal travelers should get credit cards tied to their favorite airlines and hotels, whereas people in need of logistical variety should opt for the Capital One Venture Rewards Credit Card because it’s essentially a 2 percent cash back credit card that can be redeemed for any purchase made through a travel agency or on a travel-related web site.
Cash Back
Alternatively, if you don’t travel enough to need a travel-oriented card, you can open a cash-back credit card. The options within this category again depend on your lifestyle. Cash back cards provide a certain cash back rate across all purchases; however, they often have higher earnings rates on certain spending categories such as gas, groceries or dining out. So, in order to find the best cash-back credit card, you must evaluate the total rewards package each option offers and pick the card that best fits your spending habits.
Final Thoughts
Ultimately, keep in mind that when you have excellent credit, your credit card must be “rewarding.” Avoid falling into the NPSL trap because this feature offers no upside and plenty of downside. After all, only NPSL cards have the potential to damage your credit standing when used responsibly. In addition, remember that the benefit you can extract from a rewards program varies widely by program, so pick the offer that best suits your spending habits, and enjoy the benefits of having excellent credit.
This guest post was provided by Card Hub, a website that helps you find best credit card deals, prepaid cards, and charge cards.
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