Ninety percent of all U.S. credit card holders are enrolled in a “freebie” rewards program. Offering something for nothing is an old marketing trick and we should know by now that it just isn’t so. Offers of rewards or bonus programs rarely give you anything that is truly free. You will always pay for it in the end.
Frequent flyer miles turned out to be a real hassle to redeem, and many consumers just gave up on trying. Credit card companies perceived the discontent and began a plethora of different rewards and bonus programs. The incentive is simple. They want you, initially, to choose their card over others and then they want you to spend more than you normally would in an effort to redeem points for rewards.
In order to make redemption as difficult as possible, many restrictions are placed upon the deal. You can find these in the fine print. Often you will be limited to a certain brand or given a time limitation, so you have only so long to convert your points.
You will often find higher interest rates attached to these bonuses. The rates can reach as high as nearly twenty percent. Of course such high rates invalidate any benefit you might get from the rewards. Along with increased fees and stringent restrictions, numerous cardholders never use their rewards.
It is wise not to apply for a credit card solely because of the “freebie” offer. There are many more practical things to consider when choosing a credit card. However, if you enroll in a rewards program, make sure the reward reflects your interest. You don’t want a card rewarding frequent flyers miles if you always take the bus.
Translate your personal purchasing patterns into points. The offer will tell you how much you need to spend to acquire certain measures of rewards. Compare this information to your customary credit card expenditures. If you find that you will have to spend more money than your usual pattern proposes, this is a bad deal for you.
Cash back bonuses are probably your best bet since the reward accumulates without much effort. These programs generally do not work on a points system and cash rarely goes unused. Studies point to the cash back programs as the best rewards offers.
You should avoid rewards programs if you frequently carry over a balance from month to month. The balance will be attached to a higher interest rate and you will end up doling out more money than the rewards could ever offset.
Some credit cards offer rewards to a favorite charity. Again, there is usually a high interest rate attached to these offers and the charity receives very little money. You’d be better off picking a cash back card and sending the money to your favorite aid organization yourself.
So, take care when choosing a credit card. Try not to base your judgment on a rewards program, but if you do, be certain they are rewards that benefit you. Never spend money for “freebies.”
