Credit Card Rewards - A Few Critical Things to Consider

A credit card that doesn’t offer rewards these days is like a hot fudge sundae without the whipped cream. The trick is to make sure you are getting some financial substance with all those treats: Otherwise you’re just getting creamed.

Some of the rewards typically offered by credit card companies are cash-back rewards, travel miles, charitable donations, points rewards, and low balance transfer introductory rates.

For example, Capitol One offers a cash-back rewards card that pay 1% of every purchase right back to you. That sounds great, except that the interest rate on that card is 14.90%, while the Platinum rate on their Master Card is 7.90%. Is it really worth saving 1% off your purchases for double the interest rate? No one can answer that except you, since only you know if you are likely to carry a balance (in which case you will pay interest), or pay the card off each month (in which case you won’t pay interest, and you get to keep the 1% savings.)

Many credit card rewards now involve gasoline discounts, which is a very attractive hook in today’s climate of skyrocketing gas prices. Here too, it pays to shop around. One of the best offers is Discover’s Open Road card, which comes with no annual fee, a 10.99% APR, 5% cash back on gasoline, and 1% cash back on everything else. The best feature of all is 5% to 20% cash back on purchases made through online retailers that partner with Discover, and there are lots of them, including Zappo’s, Sears, Barnes & Noble, Circuit City, Eddie Bauer, and more.  You can read more about Discover’s Open Road card at: http://www.apply-for-a-credit-card-now.com/creditcard/discover-open-road .

Credit card rewards that feature air miles are tricky. While it’s great to get air miles if you routinely fly long distances, all air mile cards are not created equal, and the airlines have been having quite the plateful of problems recently, so read terms and conditions carefully.

Here, Discover leads the pack again, with an air miles card simply called Miles, that comes with a 0% 6-month introductory rate, 10.99%  APR after that, no annual fee, and a mile for every dollar you spend, period, with no black-out dates. Other air miles cards are less generous, so make sure you thoroughly understand how and when you get to use the miles you accrue, what limitations if any are place on their use, and when and if they expire.

Rewards cards offer different features that allow purchase amounts to be turned in for additional merchandise, gift certificates, discount cards, and sometimes cash. Conditions on these also vary widely. Chase offers a Flexible Rewards Platinum Visa that comes with a one-year 0% introductory APR, no annual fee, and an 11.24% rate after the first year. The Chase Flexible Rewards Platinum Visa allows the user to choose among cash back options, merchandise, airline tickets and/or hotel stays, and gift certificates, whichever is most useful to the cardholder.

Last but not least, always make sure the rewards offered are actually helpful enough to make up for any extra cost or inconvenience. If you earn points for “free” merchandise you don’t want and have trouble getting, then a lower interest rate would be a better reward. If you earn air miles when you could finance a ticket at half the interest charged to the balance you carry to get the reward, then you’d be better off without the reward.

Credit card rewards can be just that: rewards you get for using your credit card. Financial institutions offer credit card rewards to get and keep your business. That is their job. Your job is to make sure you are actually being rewarded, not just hooked.