Monday, March 19, 2007

Is a 'rewards card' right for you?

I have a Starwood Preferred Guest Card from American Express which I use for pretty much everything I buy, from a quick meal at McDonald’s to my recent cruise vacation in the Bahamas. I pay it off every month in full and rack up some hotel points to use towards my next vacation.

A rewards card is not for everyone though. Most of them have an associated yearly fee, which could be anywhere from $25 to $100.

The Christian Science Monitor has published an informative article on the subject.

What's your rewards pleasure? Cash back? Discounted airfare? Free earphones? Whatever your fancy, there's a credit card out there designed for you. But before jumping on the rewards bandwagon, ask yourself: Will getting the reward cost me more than it's worth? Which rewards make the most sense for me?

1. Do the math. Along with the temptation to buy more comes the risk of carrying a monthly balance and losing rewards to interest or – worse – late fees. …

2. Be realistic. Think twice about getting a rewards card if you're enticed by MasterCard's American Dream card (where you accumulate points to enter a monthly sweepstakes), or Visa's World Series of Poker card (which offers reward points toward such things as buy-ins to World Series of Poker events).

3. Beware hidden costs.

4. Shop around. If you decide rewards are right for you, you have thousands of cards from which to choose. …

5. Consider going the debit rewards route.

6. Take the "merchandise or cash back" test. If you're considering merchandise rewards cards, get the card's catalog, find a cash-back card with similar terms, and see if you can get a better deal with cash back, says Arnold. There's a good chance you can. …

More here.

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