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Getting Your Just (Credit Card) Rewards: 5 Questions to Ask Before Applying

May 17, 2010

By Barbara Marquand | Money Rates Columnist

The idea of earning free stuff simply by spending money with your credit cards sounds almost too good to be true. But, thanks to the wide variety of rewards programs, you can use your best cash rebate credit cards 2012 to buy the stuff you need anyway--and earn a little prize for the effort.

Reward options have expanded from cash, gas, and airline miles to entertainment, money for retirement accounts, and discounts on everything from insurance to video game rentals.

5 Questions for Rewards Credit Cards

Before you start dreaming of all the stuff you can get, match the potential rewards criteria to your existing credit card use habits. For instance, if you typically carry a high credit card balance from month to month, you may pay far more in interest than you ever receive in potential rewards.

Ask these five questions up-front to avoid credit card rewards remorse.

1. How much does the credit card cost?

Rewards credit cards tend to carry higher interest rates than other credit cards, so be sure to compare interest rates and any annual fees before you apply for credit card offers. A difference of several percentage points could add up to big bucks if you end up carrying a balance. Make sure you look at the long-range interest rate and annual fee terms, not just the low introductory rates, which will expire after several months to a year.

Will the cost of the credit card wipe out any potential rewards? If so, ditch the rewards card and look for a low interest credit card offers, low-fee credit card instead.

2. Can I actually use the credit card rewards?

Look for the rewards that will benefit you most. Everybody can use cash, and anybody with a car can benefit from free gasoline. Other rewards--such as gift cards offered by retailers you'd never purchase from in the first place--might be less useful to you.

3. What are the credit card reward restrictions?

Read the fine print of the rewards offer to learn the restrictions. How do you cash in your points? For airline miles, ask about blackout dates. If the rules make it tough to cash in your miles, you might be better off with a cash-back rewards card. Consumer Reports in 2009 recommended against most airline rewards because of the tough restrictions and the tenuous financial conditions of the airlines.

4. How much do you have to charge to earn rewards?

Calculate how much you'd need to spend on the credit card each month to earn rewards. Is that how much you'd spend anyway? If not, consider another option. Don't let the lure of a small reward lead you deep into credit card debt.

5. When do credit card rewards expire?

Track your points, and make sure you cash them in before any expiration dates. In some cases, you have to forfeit points or airline miles if you don't use them in a year or two.

Finally, always pay your credit card bill on time--a must no matter what type of credit card you have. Late payments will typically subject you to penalty fees, and if you're over 60 days late, to an interest rate hike, too. With a rewards credit card, you may also forfeit past or future points earned.

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