Reward Cards: 6 Questions to Ask

Points...prizes...rebates

Credit cards come with some flashy rewards these days – everything from airline miles and hotel stays to cash-back awards.

Yet, one-size rewards programs do not fit all.

To really benefit from a reward card, you’ll first need to ask yourself some questions:

Does it fit my spending patterns?

A cash-back credit card that offers higher rewards on gas purchases might be good if you have a long commute, but one that rewards additional points on groceries might be the better choice if you have a large family. Bottom line: Choose a card that offers the greatest rewards where you shop and for what you purchase.

What is the true value of rewards?

The typical cash-back credit card lets cardholders earn 1 percent back on all standard purchases, or $1 back for every $100 spent. Obviously, reward cards that convert to a higher cash-back percentage offer the better deal.

How flexible are redemptions?

Some prefer cards that offer flexible redemption options. So-called “cross-over cards,” for example, offer cash-back redemption options as well as travel rewards and gift cards at leading retailers. Likewise, when choosing a travel rewards program, opt for a card with the flexibility to earn rewards from multiple airlines and hotels – it’ll come in handy when you’re trying to work around blackout dates.

Is this a limited-time offer?

Some reward cards offer higher-than-average earnings – which expire after a certain time period (or offer higher rewards that don’t kick in until you’ve reached a substantial level of charges). When evaluating reward cards, think twice about the temporary higher rewards compared to the permanent rewards for comparison.

Are rewards capped?

A 5 percent cash-back bonus is great … unless it is capped at $300 in certain purchases! Look for a card that doesn’t limit your earnings potential.

What’s in the fine print?

Don’t get lost in the glittery rewards and lose sight of the terms and conditions. Thanks to the Credit CARD Act, card issuers now provide a summary sheet that details rates and fees in a simple format – including interest rates, annual fees, and penalty rates clearly outlined by category.