I’m sorry but I will never get used to the flight attendant coming on the PA system about 30 minutes prior to landing to announce this most incredible American Airlines Credit Card where you can earn 40,000 miles just for signing up (and that 40,000 miles can get you anywhere in the continental US)! Since when did we get to the point where flight attendants are pitching credit cards (do they get a commission with every sale?). I mean aren’t airlines making enough money with low fuel prices and their wide variety of menu options (pretzels anyone?). Just another reminder of how marketing messages for financial products permeate our lives.

Hat tip to our intern, Sid Sharma, who diligently reads the financial press and pointed me to this NY Times article on selecting the best credit card. Here are some highlights from the article:

• On Cash Back, cash is king unless you are a big spender:

NerdWallet crunched the numbers on a variety of cards and found a break-even point: $8,600. That is how much the average cardholder would have to spend annually on travel to earn more with a rewards card than a cash-back card. There is one big exception: People who go overseas at least once a year generally fare better with cards that waive foreign transaction fees, a common feature of rewards cards oriented toward travelers.

• As for rewards cards, it’s important to read the fine print (and there usually is lots where that came from):

There is a reason so many cards focus their rewards structure on travel. It’s aspirational — who doesn’t like to daydream about jetting off to the tropics? — and it’s cost-effective. Airline miles and similar benefits can be bought in bulk by card issuers for a fraction of their cash value. But delving into the fine print of actually redeeming all those miles and points is a quick buzz-kill, which means that many accumulate and languish, unused.

• Sean McQuay, a guest on this NGPF podcast, recently switched his rewards strategy:

Sean McQuay, NerdWallet’s in-house credit card expert, wrote a column in December about his decision to ditch his rewards cards and shift his spending to cash-back options. With two young daughters, he travels less than he once did and spends more on household staples like groceries. He settled on two cards for everyday use: the Citi Double Cash and the Discover It card, which offers 5 percent cash back on a rotating set of bonus categories.

• Consumer Reports has a new customized tool to help make this decision easier

A new online comparison tool from Consumer Reports aims to help shoppers cut through the clutter. Plug in your monthly spending and it will cull through 55 cards to make a personalized recommendation.

• As for how all this opening and closing of credit card accounts can impact your credit score, it’s not as obvious as it may seem:

Opening new credit card accounts does not, as many people fear, automatically sink your credit score. The credit check that lenders conduct does knock your score down a few points, but a bigger factor in your score is the percentage of available credit you are actually using. If you keep your spending steady, opening new cards — or raising the credit limit on your existing cards — lowers your utilization rate and generally lifts your score over time.

But if you decide to stop using an older card, it often pays off to keep it open. The age of your accounts factors into your credit score and closing older accounts takes a toll, especially if it reduces the total amount of untapped credit you have available.

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Combine this article with this NGPF Selecting A Credit Card Activity

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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