The Best Credit Cards Now

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Maggie: This morning's edition of Ask it Early is going to focus on credit cards. We want to help you manage that. Early Show financial correspondent Ray Martin is here all set to answer viewer questions. Good morning Ray.

>> Ray Martin: Good morning Maggie.

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Maggie: Let's get right to our first viewer who's on her webcam this morning. Elizabeth Betton assumed spelling. She is in Brookline, Mass. Good morning. Go ahead Elizabeth.

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Elizabeth: Good morning. Hi Ray.

>> Ray Martin: Hey Liz.

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Elizabeth: I have a question for you.

>> Ray Martin: Mm-hmm.

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Elizabeth: I have several different credit cards, each which carry an annual fee and I'm wondering what our recommendation is for how many different cards I should carry and which ones.

>> Ray Martin: Yeah, I get that question a lot, and my advice had been you really only need one credit card. But these days I say you need two credit cards.

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Maggie: Is that right?

>> Ray Martin: First you need a credit card issued by a bank. Hopefully the bank you use, they offer a competitive credit card where you have your checking account. That way you can monitor your checking account when you're paying bills and your credit card all online. And you use that for most all your spending. You've got to have one for hotel reservations, rental cars and shopping online. You don't want to use a credit card shopping online. The second credit card, and you need a backup these days I say, use a credit card that gives you exchange rates when you're travelling abroad like an American Express card is an ideal card here. They give you the best, some of the best foreign currency exchange rates and low cost when you're charging restaurants and hotels travelling abroad. And it's good to have it as a backup as well. Bank cards mostly are just not competitive in that department.

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Maggie: So if I bank with a particular bank, you're saying they should give me a better credit card?

>> Ray Martin: You should be able to get a good credit card if you're using a major bank.

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Maggie: What kind of things should I be asking my bank for?

>> Ray Martin: Well, first you want to know what the fees are for it. You want to look if it has rewards programs. You want to know that also you can look at it online and monitor it online while you're monitoring your checking account. That way when you go into your checking account, you can also see your bank card on the same website.

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Maggie: Kill two birds with one stone.

>> Ray Martin: Absolutely.

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Maggie: Speaking of rewards programs, Liz I know you have another question related to that, right?

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Elizabeth: Yes, exactly. There are so many different credit cards out these days, Ray and it's like so many different rewards programs. Which ones do you recommend and how do we begin to make sense of it all?

>> Ray Martin: Well, there certainly are a lot of awards programs out there.

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Maggie: Confusing.

>> Ray Martin: And very confusing. So I've got a couple of rules here first for the high level. Look for the best rewards to points ratio. With so many programs out there, some will cost you double the points to get a certain reward. It may cost 5000 points just to get a $25 gift card. Others might only cost half the number of points. So the best rewards to points ratio. The second thing is, you know, rewards programs aren't just for frequent flier miles or plane tickets. Don't use a card that's tied just to frequent flier miles on one airline and that's it. Get a rewards program you could actually use. You can get rewards programs that add cash to your retirement savings accounts. You can enroll in a card with something like You Promise, where you get cash added to your child's college education savings accounts and reward programs for things like gift cards as well. Very flexible, and hotels and airfare as well. A lot of flexibility. Rewards you can use is the key.

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Maggie: Something else that can be confusing about these reward cards.

>> Ray Martin: Yeah.

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Maggie: What if you're carrying a balance?

>> Ray Martin: Yeah, if you're carrying a balance on your credit card, a rewards program card is not for you because they come with higher interest rates.

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Maggie: Oh.

>> Ray Martin: If you're carrying a balance, instead you want the lowest interest rate credit card.

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Maggie: Okay.

>> Ray Martin: So you can pay off that balance. 13 million Americans are still carrying a balance on their credit card from last year's holiday spending and two-thirds say they'll spend less next year. So that's really important. Get a low interest card, not a rewards program.

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Maggie: And if the rewards cards have annual fees, which a lot of them do, is it worth signing up for?

>> Ray Martin: There are so many that don't have annual fees, choose a rewards card with no annual fee, because that just eats into the value of a reward.

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Maggie: Okay. Very good. Elizabeth, thank you. Hope you got your answers.

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Elizabeth: Terrific. Thank you.

>> Ray Martin: You're very welcome.

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Maggie: Ray, thank you as well.

>> Ray Martin: All right. You're welcome Maggie.

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Maggie: And remember, if you have any financial questions for Ray, go to our website Earlyshow.cbsnews.com and we will let you ask it early.

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==== Transcribed by Automatic Sync Technologies ====