Knowing which credit cards offer the best value on the market is one thing. But knowing which ones make the most sense for you is a different story and requires much more self-awareness.
When I made the leap from travel credit cards to cash-back cards this year, I didn't do it lightly. I considered my spending: Instead of going on business trips every week, like I did at a previous job, I was working in San Francisco and spending more time with my wife and our two daughters. And like most U.S. families, we spent more on groceries and other household expenses than on travel. Continuing to use my travel cards for everyday purchases, I realized, was like holding onto clothes that no longer fit.
My new spending patterns put me in good company. When NerdWallet's credit card analysts compared the value of various credit card rewards programs based on average U.S. household spending, cash-back cards outranked travel credit cards. I know from experience, though, that reassessing your personal spending and changing your main card is easier said than done, even when the numbers are on your side.
Making the switch
It's hard to ditch your favorite credit cards. For one thing, our brains
to tell us that what we already own is more valuable than what we don't have, regardless of its actual value. The status quo feels comfortable. This is what makes us hesitant to sell losing stocks or, in my case, stop using travel credit cards for everyday purchases, even though I knew I was no longer getting the best deal.
There's also the matter of accounting for what might happen in the future, without being overly optimistic. After all, who doesn't like the idea of being well-traveled? "Traveling more" was among the 10 most popular new year's resolutions in 2015, according to a Nielsen survey. And travel credit cards, which often charge annual fees, were the most sought-after cards in 20 states and Washington, D.C., according to a NerdWallet study this year.
But few people report actually spending money on travel. In 2014, only a quarterly average of about 15% of U.S. households reported spending money on out-of-town lodging, and just about 10% reported spending money on airline fares, according to data from the Bureau of Labor Statistics.
That said, some travel cards offer decent value to people who don't travel often. General travel cards with flat-rate rewards, such as the Capital One Venture, can help you to go on vacation every once in a while without making it more difficult to earn rewards.
But often, travel cards don't offer as much long-term value as cash-back cards for non-travelers. Here's why:
- Redemption options: If you don't travel much, you'll have fewer opportunities to redeem your points or miles. A cash-back card, in contrast, offers more flexibility.
- Travel bonus categories: Some travel cards, including airline cards, hotel cards and certain general travel cards, dole out bonus points for travel spending. But if you never spend on travel, you could be stuck with a low 1% rewards rate on these cards.
- Travel perks: Perks like free checked baggage, lounge access and companion passes can pay off if you travel, but these benefits may also drive up the annual fees on these cards. If you don't use the perks frequently, they may not be worth the cost. Cash-back cards offer more no-annual-fee options.
Travel cards sell a dream: Spend money and you'll get a free vacation. The only problem is, if you don't travel, it's a lot harder to turn that dream into a reality.
Cash-back: A better choice?
Cash-back cards, or cards that pay out in checks or statement credits, generally offer more value to the average U.S. household than travel credit cards, according to
.
The study, which rated cards' value based on average U.S. household spending, named the Blue Cash Preferred Card from American Express the most valuable card. It's no surprise that this notable grocery cash-back card topped the list, considering the average U.S. household spent $3,971 on "food at home" last year, according to the Bureau of Labor Statistics, much more than any other spending category you would reasonably charge to a credit card. The Citi Double Cash was in second place.
Travel cards still make the most sense for frequent travelers. Among the minority of households that report travel expenditures, the average total spent on trips exceeded $4,000 in 2011, according to the most recent data available from the Bureau. But if you spend much less than that on trips, generally speaking, you'll get better long-term value from cash-back cards that match your spending profile.
Next steps
In the next few weeks, as you make plans for 2016, take the time to look at the cards in your wallet with fresh eyes. Consider how you're spending, and whether the plastic you already have is worth using regularly. Don't keep paying annual fees on cards you don't use just for the sake of keeping them open -- the cost
the boost these open cards may give your credit score.
Instead of choosing a credit card you want to grow into, go with one that already fits.
Sean McQuay is a credit cards expert at NerdWallet. A former strategist with Visa, McQuay now helps consumers use their credit cards more effectively. If you have a question about credit, send him an email at asksean@nerdwallet.com. The answer might show up in a future column.
Photo of Sean McQuay, courtesy of NerdWallet.
This column first appeared on NerdWallet.
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.