Your credit score is good, you have good credit history, and you've always paid your bills on time. You don't go over your limits. And for this, what do you get? A dozen credit card offers a week, all marked "You're Pre-approved!" It looks like junk mail, and in truth, much of it is. Maybe even most of it. But pay attention! Some of these are good credit card offers that you can use to your advantage. After all, you've worked hard at establishing your good credit history, so why not make the most of it? Let those credit card companies come to you and compete for your business. The important thing is to figure out which perks you need and which ones you don't, and choose the card that best suits you. There are a million different programs that the lenders offer, all in the hopes of getting your business. You might get frequent flyer miles, hotel rooms, cash back rewards, discounts on DVDs and other merchandise, trips, mutual funds, and everything else. All of this is so you'll choose their card and use it frequently. Most of these perks can be separated into two classifications: cash, and rewards. Cashback cards are often the most appealing for the obvious reason: You get cash back! Who wouldn't want that? Some give you a flat percentage rate (usually 1 percent cash back on every dollar you spend), while others have a tiered system, with a range of 1/4 percent to more than 1 percent, based on how much you actually spend. When it's a flat percentage rate, it's simple. If it's 1%, and you spend $100, you get $1 back. Some cards offer a higher cash back percentage -- as high as 5 or 10 percent -- but with the stipulation that it only qualifies if you spend the money at selected retailers or vendors. The lender might have a deal with Starbucks, for example, or Best Buy. Most cashback cards also have a limit on how much you can earn in a given year. Some also stipulate that you must carry a balance from month to month -- which means your cash back earnings will probably be canceled out anyway, since the monthly interest charges will be higher. (Remember this: cashback cards usually have higher interest rates than their non-cashback counterparts.) The tiered percentage rate is beneficial to you only if you spend a LOT of money -- like $50,000 or more per year. If you spend less than about $7,000 a year, the tiered system won't help you at all, and the flat rate would be a good credit card offer for you. Now we come to the rewards cards. Just like the cashback systems, these give you rewards based on how much you spend. The rewards can be in terms of travel, services, and products. TRAVEL: Some cards focus on travel, granting you discounted or free hotel rooms, free airline tickets, and travel packages, and other holiday-related perks. You earn "points" with your spending (usually a few "points" per dollar), and you rack up those points to "buy" prizes. Many of these cards charge annual fees, though, as much as $50 or more. It's a good credit card offer for you only if you do a lot of traveling and you're certain to accumulate enough points by being a regular customer of particular qualifying airlines or hotels. MERCHANDISE: Retail cards operate just like the travel ones, except instead of hotel rooms and airline tickets, you get merchandise. These cards include ones related to a specific company (like the Shell MasterCard), as well as general cards that have deals in place with particular vendors, where every dollar you spend at that vendor earns you points. These systems are usually tiered, meaning you get more points the more money you spend, or that you'll get better bonuses by using the card at particular stores or on particular products. Be sure to always spend wisely, though, and keep your credit score high. CARS: Even car makers are getting in on the act. They'll create incentives on their cards with prizes that help you save up to buy new cars. For example, General Motors has a Household GM MasterCard that grants you 5 percent rebate on everything you buy with it. You can save up that money for up to seven years to buy a new car with it. INVESTMENTS: Some cards are geared toward companies that provide financial services, and the rebates you earn can be used as investments such as mutual funds or college investment accounts.
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