Rewards Cards

(MoneyWatch) 

Are rewards cards worth the cost?

by Jane Bryant Quinn

With a rewards card you earn "points" based on the amount of money spent.

You can use those points to buy airline miles, catalog purchases, or earn cash back. The cards are worth it if there's no up-front fee and you pay off the balances every month. Even if you carry balances, rewards cards are good as long as you don't pay a higher interest rate than you would on a regular card. Always compare offers before making a choice — some cards give three points for every dollar spent, others give only one point. Some get good ratings from consumer groups, others don't. Get all the details at CardOffers.com. I like airline miles, so I carry a rewards card and use it to charge everything in sight. If you're not a traveler, choose a cash back card that will send you a check equal to 1 or 2 percent of your purchases.

What about using your points to buy catalog merchandise? Forget it — the goods are often overpriced. Instead redeem your points by asking the card issuer to send you a check.

Some rewards cards, however, cost more than they're worth. They carry annual fees or charge higher rates of interest than plain-vanilla cards, making them losers for people who carry balances. Airline cards generally charge higher rates than general-purpose rewards cards from Visa and MasterCard. You're better off with lower-rate cards whose points can be used on several airlines.

What's more, rewards cards are tricky. You may earn points for everyday purchases but only for a limited amount of spending each month. Points may not be awarded for shopping at discount stores, department stores, convenience stores, or online. Cash back cards may pay the full amount only on spending that exceeds $3,000 in any year. Your points may expire if you don't use them. Airline points can be hard to use because of high demand and limited numbers of free seats. If you pay late or go over your limit, you might lose your rewards that month. The bank can change the rules at any time. So know your card's rules to get the most bang for your plastic bucks.

Excerpted from Making the Most of Your Money Now by Jane Bryant Quinn

Copyright 1991, 1997, 2009, by Berrybrook Publishing, Inc. Reprinted by permission of Simon & Schuster, Inc

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