Here's a CNNMoney piece that quotes Consumer Reports on the value of rewards credit cards. The article starts out talking about how reward credit cards are usually not a good deal for consumers:
About 85 percent of U.S. households participate in at least one rewards program, according to a study released Monday by Consumer Reports. And though rewards do spur consumers to spend more, the study found that confusing rules and restrictions make most reward cards more trouble than they're worth.
"They make it 100 times more complicated," said a former marketing executive at CitiCards, referring to the popular rewards programs. For example, when you read the fine print, you might find that some rewards are limited to certain brands, or expire if not used within a certain timeframe.
I have to agree here. Some of the cards out there (especially points programs) are so confusing and complicated it's amazing to me that people sign up for them. This is one reason I like to keep it simple -- give me cash! It appears that many others are the same way because the article says cash back programs are the most popular. But the article gives a downside to them:
And while cash back, gas and grocery rewards credit cards can offer some relief for costly essential items, they often carry higher annual percentage rates than traditional credit cards, Consumer Reports said. Looking at some of the more generous credit card rewards programs, the study found that rates varied from 9.74% to as much as 19.99%.
Here's my response to that comment -- WHO CARES WHAT THE APRs ARE? I don't have any idea what the annual percentage rates are on any of my cards. Why? Because I NEVER carry a balance on them. Translation: I pay them off every month. If people can't do this, then of course having a reward card isn't "worth it." They'd be much better off not having one and not paying the associated interest. (And a related tip -- you don't need to pay an annual fee either. I certainly don't.)
The piece also lists several tips to get the most from reward cards including:
- Consider where you shop. Opt for cards that will earn rewards at stores and services you use most often, or offer savings on items that you actually buy regularly.
- Project your spending. Figure out how much you're likely to spend, and translate that into cash back or points, depending on which program your card uses.
- Favor cash back. Cash back accumulates without you actually having to do anything. Plus, Consumer Reports found that cash back cards tend to offer better rewards than point equivalents.
- Skip credit if you carry a balance.
- Do the math on do-good programs. You're probably better off going with the cash back, and then sending money to a charity yourself.
- Use airline miles fast. Airlines are always changing their redemption rules, and considering how much the big carriers are struggling these days, holding onto unused miles can cost you.
- Avoid temptation. Overspending for a "freebie" often doesn't pay.
This bears repeating: "Consumer Reports found that cash back cards tend to offer better rewards than point equivalents." They're simpler to manage as well (not as confusing) and the rewards (cash) can be spent on anything. What's not to love?
I can't find it online, but in the actual copy of Consumer Reports for July, they list the best reward credit cards. The best cash back cards are the two that have been at the top of the list for some time: Blue Cash from American Express and the Chase Freedom Cash Visa Card. This is great news for me since I'm using both of these cards to try and maximize my cash back rewards this year.