7 Tips On Using Credit Card Rewards Programs And Avoiding Rip Offs

Whether it’s because of frequent flier miles that are impossible to redeem, overly complicated terms and conditions or reward credit cards with high APR’s, credit card reward programs are usually a rip off, according to CNN Money. Consumer Reports says that about 85% of American households participate in at least one rewards program which encourage consumers to spend more money but often turn out to be more trouble than they’re worth. To help you wade through the confusion, Consumer Reports has assembled 7 tips to help you make postive use of credit card reward programs. The list, inside…

7. 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.

6. 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 minu
scule reward.

5. 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.

4. 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.

3. 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.

2. 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.

1. 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.

If you think about, what credit card company is going to give you something free unless it is making them more money? These companies have have enormous hives of supercomputers and datajunkies working nonstop to make sure they’re making more money than they’re giving you in rewards.

Credit card rewards are a real rip off [CNN Money]
(Photo: Getty)

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  1. Mr_Human says:

    I’m on Citibank’s Thank You points network, which links credit cars and bank accounts to accrue points. I love it, actually. I pay off my bill every month, so the points turn into freebie gifts cards that I usually use at Banana Republic or the Gap. I probably get about $250 worth of free clothes a year. Do I use my card more as a result? Yes, but only on items that I would have bought anyway in cash.

  2. Pop Socket says:

    I used American Express Rewards Points to pay for an entire trip with airfare, hotel, and rental car. It had only taken me twelve years to accumulate that many points and I was lucky to use them when I did because now the points expire after a certain amount of time.

  3. tastybytes says:

    cash reward with usaa.. no brainer..

  4. failurate says:

    We use a Chase Amazon card to pay for pretty much everything we normally would have written a check for. They send us $25 to $50 Amazon gift certificates every other month.
    Previously I used a Citi cash back card that had ridiculous returns (3%-5% on quite a few purchases). They cut it down to 1% for everything, so we made the switch to the Amazon card.

  5. nrich239 says:

    The only rewards card I have is an Amazon.com Visa. It gives points per dollar spent and additional points when spent at amazon. When you hit 2500 points, they automatically cut you a gift certificate. Couldn’t be simpler.

  6. Ken says:

    I’ve had CHASE Cashback card for a while now.. I just deposited a check for $250 yesterday!

  7. bonzombiekitty says:

    @Mr_Human: I’m on that too, I also have a citi bank dividends card. After doing some rough calculation, I figured out I’m earning roughly .7 cents for every dollar I spend on the card with the thank you points. Since I don’t do banking with citi card or really have a reason to use the stores that offer higher points per dollar.

    However, on my dividends card, I get back at least 1 cent for every dollar I spend. I use my dividends card now. Although the dividends card has a limit as to how much I can earn back within a year, while the other card doesn’t have a limit on points, I never approach that amount though.

  8. theblackdog says:

    I forget that I am even part of a rewards program (one of those generic points programs) until I randomly get the “Oh hi, this is how many points to have!” E-mail.

    I have occasionally gotten something off of there, but it’s not one of those things that makes me think I need to put money on my card just so I can get some shiny overpriced prize.

  9. privatejoker75 says:

    I have a chase freedom card and love it. I got $250 free for signing up for it and whenever i save up $200 in cash back they mail me a check for $250. I route every recuring bill i can to that card. Not only for the cash back, but the time savings and not having to keep track of everything

  10. ConsumerAdvocacy1010 says:

    I have a Wawa Visa. Gives me 10% back on gas and wawa food (for another 64 days). 4% back on gas (unlimited) after that. Anyway, I pay my balances in full and on time…so rewards make sense for me.

    Oh, something IMPORTANT. Read the FINE PRINT: Some cards have it in their agreement that if you miss even a single payment…they can invalidate any and all rewards earned up to that point. That’s what a Capital One Card offer had in the fine print that I *promptly* shredded. Beware.

  11. Jesse says:

    I use Citi’s Dividend Platinum card as well. The rebate used to be awesome at gas stations, drug and grocery stores, but they cut it back to 2% from 5% & kept it at 1% for everything else.

    Nonetheless, I still use it for everything since it beats my Check Card rebate (.25%, thanks US Bank!) and just pay the balance off every month.

  12. mike says:

    Better be careful if you pay off your balance in full every month. The bank might close your account for being too good.

  13. theczardictates says:

    I have a Costco Amex card for cash back that more than pays for the Amex membership and the Costco membership on groceries and gas.

    I also have a Citibank MC affiliated with Upromise that trickles money into a 529 for my son. I use that anywhere that doesn’t take AmEx.

    I used to have an MBNA card affiliated with AAA that gave cash back on gas, but stopped using it after they halved the cash back — i’m better off now using my Amex card. MBNA probably isn’t too bothered because I suspect I was on their “worst customers” list: only used it for discounted gas, never carried a balance. They were probably losing money on me.

  14. johnva says:

    #3 is by far the most important point. If you’re someone who regularly carries balances, reward cards are not for you (and in fact, credit cards in general really aren’t for you, either). Of course, I have a 5% gas/grocery/drugstores rewards card that only has about a 10% interest rate right now (not that I’m carrying a balance), so it’s not universal that all rewards cards have terrible interest rates. Granted, that card is no longer offered, and I’m in the highest credit score tier.

    Beyond that, the best advice is to shop around for the best card. I avoid almost all cards that are tied to a particular store to get the maximum benefits, personally. 1% back is not enough for me. I also use two different cards at different places to get more rewards. This makes it take longer for the rewards to add up on any individual card but increases the total amount.

    I also avoid cards that give points or miles, in general, because it’s too easy for them to devalue them by simply requiring more points/miles in order to redeem them for anything. Also, most of the best travel cards have annual fees (although you can still get them waived often). I might consider using one only if I traveled much more than I do.

  15. johnva says:

    @linus: This has NEVER happened to me. I’m sure it does, but the likelihood is probably reduced if you use your cards for everything and not just the purchases that get you the most cashback. Remember, they still make money off of you from every transaction even if you don’t carry a balance.

  16. DavidCopperballs says:

    Here’s a tip: if you’re ever planning a big purchase (furniture, appliances, a car…) call the credit card company and ask if they can lower your interest rate. Probably a good idea anyway, but take it a step further if they say no. Ask if they can reward your loyalty by giving you bonus points, either permanently on “everyday purchases” or for a short period on everything. Maybe they’ll say yes to one of those.

    Two years ago, I called to have my APR lowered on an AT&T card linked to the Thank You program. They said it was the lowest it would get but wanted to reward my loyalty by giving me 3 months of 5x points. It just so happened I was going to buy a car at the end of that month so it worked out pretty nicely. Just with that purchase, I earned an extra $100 Marriott certificate for my honeymoon.

  17. spinachdip says:

    My Citi card is an AAdvantage miles card. I signed up when I was doing a lot more flying, but I have no idea when I’ll use the miles again.

    My total mile count is around 48k and change. Should I stay on until I reach 50k, which would get me 1 or 2 award tickets depending on when/where I fly so I’ll get some use out of the miles, or cut my losses and switch to the Thank You or Dividend plan?

  18. ThunderRoad says:

    Been using the AMEX Blue Cash card for a year now. Love it in every way.

    I may get an Amazon card since I get a lot of things from there, so it might work out better for some things.

  19. PeteyNice says:

    I have the Starwood Amex. There is an annual fee but I travel enough for it to be worth it. You get a 25% bonus when you transfer to airlines and Starpoints transfer to a lot of airlines. So 20,000 Starpoints = 25,000 Northwest (or Delta or AA or lots of other airlines) Miles = Free domestic ticket. Not to mention reasonably good point prices to redeem for rooms at Starwood hotels (Sheraton, Westin, W, etc) and the overall awesomeness of American Express. IMHO, this is still the standard for travel rewards cards. I also find that I do better value wise using it than I would for most cash back cards. Generally my airline tickets have been $500+ for domestic tickets. Unless there is a 3% back on all purchases with a very high cap, cash back cards cannot compete.

  20. aleck says:

    ATT Universal, which I think it a part of Citibank now. They have a great reward program with 5% gas and groceries and 1% everything else. I net about $70 a month in points. The rewards are through Thankyou network, which steers you towards buying overpriced stuff. But I found a little gem in the network – College Loan Rebate. You can pay student loans with the points. The point conversion rate is much better than getting straight cash. This covers my loan payment every few months.

  21. MissPeacock says:

    @failurate: I do the same thing. I love, love, love my Amazon card, and since I use it for everything, I get a ton of $25 gift certificates toward anything I’d like at Amazon. Just pay it off at the end of the month, and it’s pure gold.

  22. Mike8813 says:

    @failurate: Same here. Been using the Amazon card for a while now, with about the same return in gift certificates. It’s pretty much the next best thing to a cash back program, since you can buy damn near everything on Amazon.

    Unlike when I was using a Circuit City rewards card… Then you after you get your gift certificate, you spend a month researching their prices to find something you’re not getting ripped off on. Boo…

  23. pooryoric says:

    Amex Starwood preferred card – points for hotels. Capital One – miles. We don’t travel a whole lot, so we don’t accrue miles the way frequent flyers do. And using the points for hotels lets us stay in really nice places that we’d never spend cash for.
    Maybe cash back would be better, but then we’d just spend it on bills. This lets us sort of save for vacations without having to think much about it. Since we’re a family of 6 we’ll never pay for a whole vacation this way, but at least it takes some of the edge off the sticker shock.

  24. johnva says:

    @PeteyNice: I agree that that is the best travel card out there. I just don’t think I travel enough for it to be worth it.

    Another tip for everyone – using airline miles (and converted points) for upgrades rather than free tickets can often be much more worthwhile, if there is availability. The difference in price between an economy and business class ticket might be much more than the cost of the economy ticket, but the cost in points can be LESS.

  25. jennej says:

    PenFed Visa Platinum Gas Cash Reward: 5% cash back on gas, 2% on groceries, 1.25% on everything else. Unlimited cash back, credited to your statement every month. Anyone can join PenFed even if you have no military association (read the “how to join” page), but you have to have good credit to get the CC. I pay it off every month so the interest rate doesn’t matter. PenFed

  26. johnva says:

    @jennej: The 1.25% on everything else is good. Another card with greater than 1% on everything is the Fidelity card, which gives 1.5% deposited to an investment account.

    Right now though, I still have a Chase card that gives me 5% on groceries and gas. It’ll suck once that sweet deal ends. I currently use that one for those places and a Chase Freedom for everywhere else (since it gives 3%) at a wider variety of places.

  27. theblackdog says:

    @theczardictates: I have been tempted to get that card, but I just don’t quite buy enough from Costco yet to make the rewards enough.

    Still, Costco’s cheap gas already paid for my membership this year.

  28. khiltd says:

    @theblackdog:

    You can get money back from Costco just for being an executive member. It’s an extra $50/yr, but I got a check for a couple hundred out of it last year, plus all the money I saved on stuff I bought there in the first place.

    I too do the Amazon card thing. If my landlord accepted credit cards I’d get an extra $50/mo out of it, but she doesn’t so it’s only $25. Chase is kind of a pain, but there’s no bank that isn’t.

  29. mrosedal says:

    Discover has been giving me free money for over 4 years now. Most of my clothing is from them. The key is to never carry a balance.

    Also I recently was going to get an espresso machine from one of my credit cards. They wanted 12000 points, but I looked and found out that you get $50 gift certficate for 10,000 and the item I wanted was just short of 50 on Amazon. I saved 2000 points that way.

  30. privatejoker75 says:

    @Linus – i’ve had 2 different CCs for the past 10 years. I have NEVER carried a balance and i’ve never lost my cards. They still make 1-2% on all of my purchases and i charge $1200-1500 a month on my cards.

  31. nforcer says:

    I use a BP Chase Card. 5% back on BP gas, 3% on restaurants and hotels, and 1% on virtually everything else. Those percentages are doubled for the first 60 days. Once your total reaches $25, you can opt to have Chase send you a $25 check. I noticed a lot of people use the Amazon.com Chase card, but this is really a better option if you do the math, because instead of your reward being a gift card, it’s cash. You can keep using the card and funnel the cash back into your next bill, earning more towards the next $25 instead of using the “same as cash” gift card.

  32. balthisar says:

    I don’t agree that airline miles are impossible to use — yet. American will let you fly if there’s a seat available, pure and simple. No blackouts. Well, yeah, if you want to use Saaver rates (half the miles), then there have to be available Saaver seats and there are some blackouts. I just don’t budget around those rates, and if I get lucky, then it’s just an added bonus.

    I am nervous about AA’s current health, though. Maybe I should spend some of my 200k+ miles while I have the chance. The thing is, for what I’d want to go using them, I’d have much better experience on Aeromexico. So… fly dirt cheap but crappy, or pay a nominal fare and be treated like a human being? FWIW, I had dedicated myself to American when (1) they had the only route to where I most travel privately; (2) They were spacing out tourist class seats giving additional legroom; (3) hot food included; (4) Free booze on the international leg! None of those are true today, though.

  33. EBounding says:

    Discover offers 5% on gas for the first $100 spent each month. If I spend more than $100, I switch over to my CitiDividend for 2%.

  34. forgottenpassword says:

    I use the citibank platinum dividend card (called something like that)…. it USED to have a better cashback rate, but I’m too lazy to go looking for a new card with better rewards. I think I get back maybe 100-200 bucks a year in cashback rewards (average spent on the card a month is probably $400). I pay for everything I can with that card (its just easier for me so I can pay one bill a month instead of using cash or checks). I also pay it off every month. And i dont think I spend more than I usually would by routing nearly every purchase thru the card to get the rewards.

  35. Gopher bond says:

    I like Discover too. I get about $100 cash back every year. I run all of my bills through them to pay one bill every month. They have specials every three months or so that gets up to 5% cash back. Plus, it’s your choice to redeem the cash or you can, say, get a gift card to a restaurant for a premium, like redeem $45 cashback bonus for a $50 restaurant gift card. My Discover APR is only 12%

    Plus, Discover has given me the best customer service whereas my other cards often treat me like I’m trying to scam them.

  36. Don Roberto says:

    Citi dividend world mastercard. Max it out every year, then go to the citi diamond rewards amex.

  37. pinkteapot says:

    Anyone have an HSBC cash or fly rewards card? Trying to figure out the catch, with no annual fee and option for cash back or points..

  38. onesix18 says:

    This should be a no-brainer:

    1. Develop a budget for your spending
    2. Stick to the budget
    3. Use a no-annual-fee cash rewards credit card to make all your purchases
    4. Do not ever make additional purchases ‘because you’ll get points’
    4. Pay the credit card in full each month
    5. Receive cash rewards at regular intervals
    6. Wash, rinse, repeat.

    What’s so hard to figure out?

  39. Gopher bond says:

    @onesix18: “What’s so hard to figure out? “

    apparently, the #4s

  40. balthisar says:

    @onesix18: Sometimes I make my restaurant decisions based on whether I’ll get points. For example, I’m kind of in the mood for (a) or (b), and if (b) gives points, I’ll choose it over (a). If course if I’m in the mood for (a) but not (b), I won’t choose (b) just for points.

  41. pgrundy says:

    I have an NCC rewards card and it’s great–just got two free LL Bean shirts for free and a $50 Barnes & Noble coupon. The points pile up fast, and there’s no catch, no fees, I can’t see a single negative–except now I’m getting to the point where I just don’t need much of the free crap offered.

  42. BarkingLeopard says:

    @pinkteapot: Yup, had it for a year or so now, and it’s my primary credit card. Now that I read this article, though, I think I’m going to look for another credit card, as it’s only 1% back. Aside from the 1% thing, the “catch” is that you can only get cash back in increments of $25 (i.e., you have to spend $2500 before you can get cash back), which I think is pretty common. I don’t intend to try the fly rewards because 1) I don’t spend enough and 2) I’m suspicious of all things associated with airlines and airline miles, and I’m assuming until told otherwise that there are some massive blackout dates involved.

    I’m a student, so I don’t charge a ton (though it’s surprising how fast it adds up). I have requested the $25 a couple of times, though, and they do get the check in the mail in a week or two- though it’s a shame they can’t just save some carbon and a trip to the bank and just take it off my next bill.

  43. LosersHaveCreditCardDebt says:

    If you can’t pay the credit card bill in full every month, you can’t afford what you are buying. Period. Do you want to pay for last week’s restaurant steak dinner for the next 20 years. If you do. See my name.

  44. LosersHaveCreditCardDebt says:

    My name sums up your problem.