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TWO MINUTE MONEY: How to find the right points card

Welcome to Two Minute Money, Yahoo Finance’s new personal finance series offering quick explanations for some the the most important questions involving your money.  

There are thousands of credit cards on the market right now. Choosing the right card can feel like a burden.

But today we’re going to focus on just one: points.

With these cards you earn a certain amount of points for each dollar you spend. You can then redeem these points for rewards—things like travel, dining out, entertainment and more.

Oftentimes these cards will come with sign-up incentives like waiving the annual fee for the first year and bonus points for spending big in the first few months.

These cards are not as complicated as they sound and could potentially get you more bang for your buck than other rewards cards.

Let’s say you spend $2,000 a month on your credit card. How would that add up with some of the different types of points cards on the market?

Always on-the-go? Consider a card like the Chase Sapphire Preferred. Each dollar spent earns you one point. And you earn two points for every dollar spent on travel and restaurants. The annual fee is waived for the first year.

So say you spend $500 a month on travel and restaurants. And spend the remaining $1,500 a month on other purchases. That’s a grand total of 30,000 points per year. That’s redeemable for $375 toward airfare and hotels. At this pace, you’ll also qualify for a sign up bonus, giving you another $625 toward airfare and hotels.

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There are plenty of cards on the market for one-stop-shoppers, too. Take the Amazon Rewards Visa Signature card for instance. You earn 3 points for every dollar spent at Amazon.com, 2 points for every dollar spent in earmarked categories. And 1 point for every dollar spent on all other purchases. Plus no annual fee!

Say you spend $1,000 a month on Amazon. Then spend $300 in special categories. With the remaining $700 going toward all other purchases. Add up the points totals and that’s 51,600 points a year to use toward future amazon purchases—a $516 value.

Saving up for your next car? A card like the Capital One GM Buypower card might be for you. When you spend you’re always saving toward your next GM vehicle lease or purchase. You can’t redeem cash, but points are tracked in real dollars toward a new car. And there’s no annual fee.

If you do $2,000 in swipes per month on this card, you earn 5% on your first $5,000 of purchases each year for $250 in savings. After that, you get 2% on the rest of your purchases. In total, you end up putting away $630 per year toward a down payment on your next vehicle.

Before you sign up, remember:

  • Spend within your means.
  • Points are great, but they’re not worth it if you’re taking on debt.
  • The key is to find a card with terms and rewards that best fit your lifestyle.
  • So shop around. It can really be worth your while.

And if you’re still unsure and think you might be interested in a different type of card altogether—check out our cash-back card video on the Yahoo Finance page or Facebook.

Want to be a part of a new Yahoo Finance series? We are looking for people in their 20s and 30s who need a money makeover.  Apply here.

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