Reward Credit Cards
Are They Worth It? Tips for Making Points Cards Work for You
Credit card reward programs promise everything from airline miles and cash back to reward points. Learn how to make the most of these programs.
No matter how enticing a credit card reward program seems, consider the following before you sign up for a new credit card. Your experience may be less than rewarding.
First, pay off your other cards and high-interest debt
Even the most generous reward credit cards are not going to shower you with free airplane tickets and wads of cash every month. It makes no sense to apply for a new card that promises, at most, a 5-percent reward for gas purchases when you are paying 18 percent interest on another credit card. Some reward credit cards, however, offer zero-percent annual percentage rate (APR) balance transfers for a limited time period. If you like to play the credit card juggling game, go ahead and transfer to the new reward card, but pay off your balance within the designated time limit. You won’t earn points or rewards on the transferred balance, but you can take advantage of the no-interest payback period and start earning rewards on your new purchases.
Don’t charge more than you can afford
This is obvious, but necessary, advice. If you can’t pay your balance at the end of the billing period, the rewards accrued won’t make up for the interest you pay. The credit card companies bet their attractive rewards will lure customers to their cards and then charge up hefty balances. Don’t let them win the bet. Good credit is usually required for reward credit cards.
Opt for a card that rewards the way you shop, travel
A mother or father in a family of five likely spends a great deal of time and money in the grocery store. Parents with children still at home, particularly ravenous teenagers, should opt for a reward credit card that offers 5 reward points for every dollar spent on supermarket purchases, such as the Citibank Diamond Preferred Rewards Card. This card also gives five reward points for each dollar spent at gas stations and drug stores and one point per dollar for all other purchases. Big box store grocery shoppers beware: Supermarkets under Citibank’s definition are stand-alone stores selling primarily food items. Wal-Mart, Sam’s Club and Target don’t qualify.
Tip: Cash in Citibank Thank you Points for gift certificates at such stores as Target and Home Depot instead of the individual rewards offered through the program. Your points will go farther if you purchase a digital camera with your store gift card than it would if you directly traded your points for the camera offered through the Web site.
If you fly frequently, racking up airline miles through a credit card such as the Capitol One No Hassle Miles Card may earn you free tickets fast. Keep in mind, however, that struggling airlines in the U.S. are charging hefty fees for redeeming credit card flight rewards.
Use introductory offers to your advantage
Nearly all reward credit cards offer periodic incentives to encourage new customers, such as additional reward points with the first purchase. Do your research and wait until you find a juicy offer before signing up for a new reward credit card. A good site to research all types of credit cards is CreditCards.com.
