Insider Secrets From a Rewards Points Fanatic

Credit card companies offer a dizzying array of rewards cards. They come with numerous sign-on bonuses, fees, perks and partners -- so many that the choices have befuddled even the savviest of shoppers. So how do you pick?

Maximizing credit card rewards

Let "The Points Guy" help you.

In his first interview with Bankrate.com, Brian Kelly, founder of the popular website ThePointsGuy.com, demystifies how to choose a rewards credit card. Kelly explains how the right card can get you a lot more for your money.

What kind of rewards do credit cards offer?

Rewards cards come in three main categories. The first are cash-back and fixed-value cards. They have a very specific, easy-to-understand benefit. They'll give you one point, or maybe a little more than that, for every dollar you spend. You can then convert those points to cash or discounts at a penny per point. Spend $1,000, for example, and you'll get 1,000 points, which converts to a value of $10. The negative side is it can take a lot of points to get a free flight, hotel room, rental car or other redemption. [The Points Guy] The Points Guy

The second type is the cobranded credit card, and they align with hotel companies and airlines. The benefit here is that you earn points for their loyalty programs, and some of those are extremely lucrative. You can get a lot more than 1 cent per point with these cards. A lot of them come with perks such as elite status, free checked bags and priority boarding, so they can make sense for travelers. The downside is that when you redeem those points through loyalty programs, you usually have to work around award availability. Some programs don't allow you to just book any flight. And some airlines have made flights during peak times extremely expensive to buy with rewards points.

The third type is the card with a transferrable points program. These give you the best of both worlds. You can redeem points for any flight, and you can also transfer points to a number of airline and hotel loyalty programs. Most of these programs also allow you to redeem points for cash. There are some drawbacks with these cards, however. Most of them charge annual fees, so you need to make sure the amount of points you're getting outweighs the annual fee. With so many different options, it can get confusing, and a lot of people don't get as much value out of these cards as they could.

Which one is right for me? And how do I pick?

I think the first step is identifying what you want out of your credit card. Do you just want cash back? Or do you want the ability to travel around the world in first or business class? Or do you want free hotel stays? You should pick your card depending on what you want.

And be strategic. If you already have elite status with an airline, you may not get as much value out of the airline credit cards because you're already getting a lot of those perks.

The great thing about credit cards is that you don't have to choose just one. If you get a couple of different credit cards, you can leverage each one for their strengths. I travel around the world and eat out almost every night. So I like the Chase Sapphire Preferred card because it earns two points per dollar on all travel and dining. Plus, there are no foreign transaction fees.

However, when I stay at Starwood Hotels in the U.S., I use the Starwood Preferred Guest credit card. It rewards me with two points for every dollar I spend at Starwood hotels, and it gives me nights toward elite status that can get me other perks like room upgrades. But the Starwood card has foreign transaction fees, so I never use it abroad.

There are some credit cards that I don't even use to make purchases. For example, I carry the American Express Platinum card because it gets me into American Airlines, Delta (and) US Airways lounges, and it's only $450 a year. That seems like a lot, but the card comes with $200 a year in airline credits to use for food and baggage. So really, I only pay $250 a year for that card, and I'm getting that lounge access. Plus, it gets me faster trips through customs with Global Entry, a $100 value, and a number of other perks like instant Starwood Gold status.

Which factors should I consider before applying for a rewards credit card?

Some cards have huge sign-up bonuses, so take that into account. For example, the Chase Sapphire card sends you 40,000 points after you spend $3,000 in the first three months. That's a $500 value. And the $95 annual fee is waived for the first year. So even if you pay the fee the second year, you're still coming out ahead.

The Capital One Venture card is probably one of the best fixed-value cards, but right now the sign-up bonus is only 10,000, which is a $100 value. It also has a $59 annual fee starting in the second year. So, before you get this card, make sure to consider the sign-up bonus in comparison to the annual fee. You need to ask: Year after year, is that card going to work for me?

And, frankly, if you're not getting more value than the annual fee, I recommend two things. A lot of credit card companies will let you downgrade to a card that has no annual fee. That way you keep the credit line open, and it doesn't have a negative impact on your credit. Or, you could just cancel the card. It could impact your credit score, but it's not a major worry for most people with good credit who pay their bills.

For international travelers, it's critical you get a card that does not have foreign transaction fees because if you use a card that does, you're paying up to 3% in fees, which negates the value of any of the points you earned.

Once I have my card, how can I maximize my rewards?

One great way to boost your rewards is to shop through online portals offered by credit cards, airlines and other companies with points programs. Never go directly to a retailer's website. For example, the Chase Ultimate Rewards shopping portal will give you 10 points per dollar spent at Kohl's. And that's in addition to the points you earn for using your credit card.

The Chase Freedom card this quarter is giving five points per dollar spent at Kohl's, so if you click through the shopping portal to the Kohl's website, you earn 10 points per dollar for going through the portal and then an additional five for using your Freedom card. In essence, that's 15% back. Plus, you can still use coupon codes and get free shipping.

Also, you can register your credit or debit card with various dining programs. By doing that, you can earn up to five frequent-flier miles per dollar when you go to one of the participating restaurants. So if you use a credit card like the Sapphire Preferred with a dining program, you'll get double points on dining and then up to five miles per dollar in whatever airline program you want.

Any closing advice?

I think it's very important to get the big bonuses on the credit cards. And I think the trick in getting the most value out of your miles or points is to understand the different frequent-flier programs. Once you accrue all these points, you need to learn how to use them well. You have to treat your miles and points like money.