Rewards Credit Cards - Are They Really a Sweet Deal?

Rewards are everywhere! Gas stations... grocery stores... pharmacies... hotel chains... They all claim to reward you on purchases that you make. Likewise, credit card companies have their own rewards credit cards programs. Simply put, the more you spend, the more rewards you get from a rewards credit card. Sounds like a sweet deal, doesn't it?

The Fun Factor of Rewards Programs

Unless you're a savvy rewards credit card shopper that's done his or her homework, then you might end up feeling like a kid again or worse yet, a fool. Remember dropping quarter after quarter into the machine trying to get that cute little stuffed animal only to end up with a little plastic finger ring and empty pockets. If lucky, you might have gotten that irresistible toy after all, but it probably cost you way more than it was really worth. With games, I guess the idea is "fun," and if you get rewarded that's even better. But with rewards credit cards, is the "fun factor" worth your hard earned money? Read more to find out how to keep the fun in the rewards.

Avoid High APRs

Cards with rewards often have higher interest rates than the typical card. For those who like to pay off their balances each month, rewards credit cards might be right up your alley. If you don't pay off your balances, then you might find that the higher rates are not worth the rewards. You will need to do a little math to figure out the best deal.

Avoid Annual Fees

Like high APRs, a reward credit card may require you to pay annual fees as much as $40. Once you've paid the annual fee, the rewards might not be enough to justify getting the card in the first place. Consider the value of the reward versus the amount spent in annual fees and interest rates.

Cash In On Cash Back

Some rewards credit cards offer cash back rewards for your purchases. For example, you might earn 1% on all purchases. If you spend $5000, then you'll get $50 back. This type of rewards credit card bases the cash back earned on the amount of purchases you make, and there might be a maximum limit you can claim. When evaluating these offers, be sure to read the fine print.

Accumulate and Redeem Points

Most point systems are designed to give you about one point per penny spent. Say you earn 1000 points using your reward credit card. You might get a reward worth about $10, such as a store gift certificate or credit that can be accumulated and applied to a larger gift reward. If a rewards credit card offers less, has a cap on the number of points you can earn or the points can expire before you use them, then you might find a better deal elsewhere. Take time to shop around!

Fly the Skies

Frequent flier programs are similar to the point system and cash back rewards. You might get one flier mile (or point) for every $2 that you spend using your card. Most cards require you to generate around 25,000 point before you can redeem them for free airline fare. Any cards that require you to accumulate more points might not be worth it. If you are a frequent flier and can benefit from this type of program, compare reward credit cards. The best place to do this is online.

There are numerous reward programs that are available when using rewards credit cards. Individual cards may have specialized programs that are tailored to various groups, such as small business owners, students, travelers, "shopaholics", etc. Just like the carnival games, a girl will run straight for the games with doll prizes, whereas a boy will want to play for balls or cars. The same holds true for credit cards shoppers. But beware of the gag gifts! Take your time to read the fine print and shop around for the best rewards credit cards.