Home > Credit Cards > Choosing a Rewards Credit Card? Avoid These 7 Common (and Not So Common) Traps

Comments 0 Comments

If you have excellent credit, you’re no doubt receiving tons of offers for rewards credit cards. And because there’s so much competition among credit card issuers, the bonuses and perks are getting sweeter by the day.

It’s certainly a great time to get a rewards card if you’re in the market for one. But don’t get too dazzled by the offers. Take your time, research the offers and compare rewards cards. Yes, this involves reading the very dull fine print, but it also includes paying attention to certain aspects of the terms and conditions.

It’s easy to miss things when you’re reading disclosure statements dripping in legalese. Even savvy consumers fall prey to some of these traps.

Trap #1: Picking the Wrong Type of Rewards Card

This happens to a lot of us. You see an offer with a good APR and a to-die-for bonus and you jump at it. But if you have a gas rebate card and what you really need is a card that gives airline miles, then you’ve got a rewards card that you can’t take advantage of.

By “take advantage of,” I mean use the card to make a profit. You have to match the rewards to your lifestyle. You fly a lot on Delta? Look at Delta-branded airline cards that give generous miles. You’re a gourmet chef and you spend a lot on groceries? Look at cash back cards. Once you pick the reward that meets your needs, you’re ready to choose a rewards credit card.

Trap #2: Seeing the Bonus Offer and Not Noticing the Spending Requirements

The Chase Sapphire Card offers 25,000 bonus points to new cardholders. That’s worth $250 toward an airline ticket, which is pretty awesome. But you have to spend $3,000 within the first three months to get this bonus. If you travel a lot or have a big purchase that you need to buy anyway, that might not be a problem.

Sometimes there’s an asterisk next to the bonus amount and if you follow it to the bottom of the page, you’ll see what the spending requirements are. But sometimes, there’s no asterisk even when there really are requirements. You have to find the fine print related to the bonus offer so you know what you need to do to earn it. There are a few offers that give you the bonus for your first purchase with no strings attached, but most of these bonuses do have strings.

Trap #3: Looking Only at the Zero Percent Intro APR and Not the Go-To Rate

Everyone loves seeing all zeroes when it comes to APRs. But don’t forget to notice what your eventual rate will be. If your future holds a 19.9 percent variable APR, then a zero percent APR for 12 months doesn’t seem like such a good deal after all. A related issue is not thinking about the cost of the annual fee when the first year is waived, which is a recent trend with airline cards.

Trap #4: Not Reading All the Fine Print Related to the Rewards Program

One thing I like about Discover is that the issuer makes it easy to read about the rewards. The details are generally listed below the box that shows the APR, balance transfer fees and so forth. Capital One makes it pretty easy, too.

But some issuers have the details of its rewards programs on a website other than the card’s home page. Often, you’ll see a note that says you can get more details at their rewards site. Sometimes, you don’t get the link. Here’s what I do when I’m reviewing rewards cards. I Google the card name and something like “rewards program” and see what pops up. I want to make sure I look at everything that explains the rewards program. I’ve actually had to go to multiple sites on occasion to make sure I got the whole scoop.

You want to make sure you read everything because you could find nuggets like, “If your card is inactive for 12 months, you’ll lose your rewards.” The details also make it easier for you to fully take advantage of your card. There might be airline and hotel partners you should know about or flexible options for redeeming your points or miles.

Trap #5: Not Understanding What Your Points Are Worth

It doesn’t matter if you get 5 points for every dollar spent if you get robbed when you try to redeem the points. The standard with rewards is that one cent equals one point. So 10,000 bonus points should equal $100. If you’re considering a card that requires 20,000 bonus points for a $100 gift card, keep looking for a new card.

Point value isn’t always easy to calculate because some “hybrid” cards offer cash, gift cards, travel rewards and more. So your points might be worth more when you redeem them for a gift card and less when you use them for an airline ticket. Or even the other way around. Just another reason to read the program details so you have a clear picture of what each point or mile is worth for the type of reward you’re most likely to want.

Trap #6: Not Realizing There Are Caps or Spending Tiers

Some cards give you great rewards up to a certain amount. For instance, cards that offer quarterly rotating categories might offer 5 percent cash back on purchases up to $800.

Or sometimes, you’ll see a card that requires you to meet a spending tier before you get the higher percent on cash back rewards. For instance, you might get only 1 percent until you spend $3,000 and once you reach that total, you get 3 percent cash back. Again, this is all in the fine print and you can’t adequately judge the value of a card without knowing about this stuff.

Trap #7: Not Redeeming Your Rewards

For those of you who are hard-core rewards fanatics, it might be hard to believe that this actually happens. But a study from Colloquy and Swift Exchange showed that the average household failed to redeem a third of their rewards, which came to around $205. Now, that’s not the way to take advantage of your rewards card. Keep track of them and use them. That’s why you got a rewards card in the first place, right?

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team