Know the Rules When Selecting Rewards Credit Cards

Article excerpt

NEW YORK -- Some rewards cards will pay you cash, but often there's a ceiling on the maximum payout each year. Other cards promise points for every purchase, but they may expire after just a year. Still others reward some purchases, such as gasoline or travel, far more than food or pharmaceutical purchases.

The rules for rewards and cash-back cards can be confusing, according to separate studies released Monday by Consumer Reports

and Bankrate.com. Unwary consumers may be better off passing on some of the rewards programs out there, they conclude.

That's because the rewards and cash-back cards often carry much higher interest rates than non-rewards cards and may have so many restrictions that it's hard for consumers to claim a payout.

Consumers who don't pay their cards in full each month, for example, may find that "if the (interest) rates are high, the cost to carry a balance will often erase any savings the rewards program may offer," said Amanda Walker, senior project editor at Consumer Reports.

The study published in Consumer Reports, the monthly magazine of the nonprofit Consumers Union in Yonkers, N.Y., found that 85 percent of Americans participate in at least one rewards program. Some offer rewards at a particular retailer; others double as credit cards that can be used anywhere, it said. About 3 percent of those surveyed participated in 10 or more programs.

"Along with the dizzying number of programs have come increasingly complex rules, restrictions and limits on how much you can earn," the magazine says in its latest issue.

Using data from CardRatings.com, which tracks credit offerings, Consumer Reports said that the best cash-back cards include American Express' Blue Cash, the Chase Freedom Visa and the Discover More cards. …