While it may seem that credit cards lead an innocent existence with the purpose of getting you out of a bind, credit cards companies are not here to help you. That's not to say you can't outsmart them, but CNN Money goes as far to say that rewards programs are in place to entice consumers to charge more on their credit cards and are ridden with traps. A Consumer Reports study released this week noted that rewards programs are not only frustratingly useless for the most part, but the confusing rules and restrictions make most reward cards a waste of time. The Consumerist shared Consumer Reports' seven general tips when considering credit card rewards, and while they're all good points I think numbers three and five are most helpful.
- Avoid temptation. Research shows that credit card users will often spend more in their quest to earn points toward their shiny new prize, however, overspending for a freebie doesn't make good economic sense.
- Use airline miles fast. If you manage to save up enough miles for a trip, use them quickly. You never know when one of the airlines will change their conditions or go belly-up.
- Skip credit card rewards if you carry a balance. Since reward cards often have higher interest rates, the interest on the balance you carry will probably offset any reward. Look for a standard credit card with a lower APR.
There are four more rewarding tips so just
- Do the math on do-good programs. Charitable individuals might be attracted to reward cards that give to charities. However, the reality is that they usually pay very low rates. You would probably be better off going with a cash back card and donating the money yourself which would result in a larger donation and a tax deduction.
- Favor cash back. Often times, points go unused which is a bonus for the credit card company. However, cash back will accumulate without you having to anything. Consumer Reports also found that cash back cards usually offer better rewards than point equivalents.
- Project your spending. Try to figure out how much you will likely spend per year and translate that into cash back points or reward points. Then, calculate how far that gets you toward your desired reward. Don't forget to subtract any annual fees. Move away from any card that makes you spend a small fortune for a minuscule reward.
- Consider where you shop. Lean toward cards that will earn rewards at stores and services you use frequently. For example, airline and hotel discounts won't come in handy for those who aren't frequent travelers.