You can’t turn on the TV or open a magazine without seeing incredible credit card rewards programs. Free airline miles here, free cash there, but are these rewards worth it?
If you think about it, it’s kind of like trying to win a stuffed animal at the carnival. You have to spend money, sometimes a lot of money, to throw darts at balloons before you can win that stuffed giraffe.
Is the giraffe worth the money you spend to win it? Here are a few things to keep in mind when choosing a credit card rewards program.
There are three basic types of rewards programs: frequent flyer miles, points based and cash back.
Frequent flyer miles for airline tickets can be valuable but difficult to redeem. Basically, as you use your credit card, you receive a certain amount of points to be used for airline tickets. Restrictions, of course, apply. Some airlines may have blackout dates. Some may restrict the amount of seats you can purchase or require you to book your flight far in advance. You may also be stuck paying for surcharges and other miscellaneous charges.
Another option is a points-based program. As with the flyer miles, you accumulate points as you spend money. These points can then be used to purchase merchandise, usually through a catalog. Some of this merchandise may be priced too high or might not be the best quality.
Finally, there is the cash-back program. You put X amount of money on your credit card and you get X amount back.
Before committing to any of these programs, there are several things to consider. As with any contract, you must read the fine print. Does the program require a higher interest rate? Is there an annual fee?
This is where you will need to sit down and do the math. You must make sure the interest you carry and any fees involved are worth what you are getting. If you carry a balance on your card, the interest charges may negate any rewards you receive.
For many people, credit card rewards programs are advantageous. Just be sure you cover all your bases and make sure the program you select will be a good fit for you. You don’t want to end up paying too much for a stuffed giraffe.
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