Credit Card RewardsThis latest blog post is a comment on Jessica Dickler’s article on CNNMoney.com dated June 2, 2008.   First, let’s begin with a summary of her key points.

  1. Eighty-five (85) percent of U.S. households participate in a rewards program.
  2. Reward cards have more complicated rules and restrictions.
  3. These credit cards carry a higher annual percentage rates (APR).
  4. Some rewards programs charge an annual fee.
  5. Consumers often do not use their rewards (41% of rewards cardholders).

The article is not entirely doom and gloom.  The silver lining to this article is Dickler’s comments about maximizing the value of a rewards program.  Here’s a quick summary.

  • Participate in a program where you are a frequent consumer.
  • Project spending to determine true return on your investment (your estimated annual spend vs. actual rewards).
  • Opt for cash back rewards over points.
  • Don’t carry a balance.**
  • If your program involves airline miles, use them fast and often.
  • Don’t overspend to earn your rewards.

** The only time I would consider carrying a temporary balance if the card offered a promotional 0% APR for 6-12 months.  After that, pay off the entire balance to avoid higher rates.