Home > Credit Cards > Have Patience: Credit Cards That Pay Out Annually

Comments 0 Comments

Credit Card RewardsThe battle for rewards credit card users is as fierce as ever, with banks looking to attract those with good credit and responsible spending habits. These banks want to use every trick in the book to retain existing customers, yet reduce the rewards they actually pay out. And the latest tactic seems to be offering rewards that are delivered once a year. Here are a few examples:

Costco True Earnings Reward Card from American ExpressThis card offers 3% cash back on gasoline, 2% cash back at U.S. restaurants, and 1% cash back everywhere else. Yet all rewards are only received in the form of an annual reward coupon included with the cardholder’s February billing statement.

Capital One Cash Rewards: Cardholders receive 1% cash back on all purchases, plus a 50% bonus each year on the anniversary of their enrollment.

Chase Sapphire PreferredCardholders receive one Ultimate Rewards point per dollar spent and double points on travel and dining. In addition, cardholders also receive a 7% points bonus each February, which effectively raises the total points received to 1.07 and 2.14 for these purchases (respectively).

[Related Article: The First Thing to Do Before Applying for a Credit Card]

What are the advantages of these rewards?

Reward cards with annual bonuses tend to be some of the more competitive products, and cardholders who are patient enough to wait for their bonus will enjoy some of the best rates of return. And it is not just cash-back rewards. For instance, the Delta SkyMiles Platinum card from American Express offers a free companion certificate for a round-trip flight in economy class each year when customers renew their card. This benefit can easily be worth more than this card’s $150 annual fee.

Are there downsides to annual rewards?

In most cases, credit card accounts must be open and in good standing to receive these rewards. For example, if a holder of the Costco True Earnings Reward Card from American Express closes his or her account in December, they could lose all of the rewards accumulated throughout the year. This is how banks hope to reduce the amount of rewards that they must eventually pay out.

Another problem with these programs is that they discourage cardholders from seeking more competitive products while they wait for their annual rewards. Of course, this problem for consumers is seen as a benefit to card issuers hoping to retain valuable customers. And likewise, cards that offer these rewards at the time of renewal often have an annual fee.

[Credit Cards: Research and compare rewards credit cards at Credit.com]

Can you have the best of both worlds?

With most credit cards, it is possible to redeem an annual award, pay the annual fee, but later cancel the card. And with many banks, the annual fee is refunded when cardholders close their account within 60 days of paying it. In other instances, the annual fee is pro-rated and returned in part. Be careful, however, of opening a bunch of credit cards, only to close them a few months later. This can have a negative impact on your credit report by lowering the average account age on your credit history.

Once credit card users understand how annual rewards work, they can make the best choices when it comes to using their cards.

At publishing time, Costco True Earnings Reward Card from American Express and Chase Sapphire Preferred are offered through Credit.com product pages and Credit.com is compensated if our users apply for and ultimately sign up for either of these cards. However, this relationship does not result in any preferential editorial treatment.

Image: iStockPhoto

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