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The advantages and disadvantages of rewards cards

Search for a Credit Card Reward Program

It's hard to complain when credit card companies are throwing free goodies at you like six percent cash back, super mortgage deals, low loans on vehicle purchases, free hotel stays and vacations. Except, perhaps, that there are so many rewards available to you, it can get positively confusing to decide which one you'll take advantage of. Here are some of the advantages and disadvantages to help you decide which card you want.

Advantages

• Almost everybody can benefit from rewards programs with the things they buy most—groceries, gasoline, and drug store purchases—with percent cash back on their cards. The percent cash back varies considerably, from 1% to 5%, depending on your spending habits and the card offer.
• If you're a traveler, you can get bumped up to first class, earn VIP status (and enjoy a free drink and snacks while you wait for your flight), earn free hotel stays, meals, video and DVD rentals, and many more offers that get better every day.
• If you have family, you can get great deals on family vacation packages, fast food purchases, and games.
• Credit cards helping you save money? You bet. Many rewards include special mortgage offers, low prices on car loans, and cash back. These savings can add hundreds of dollars to your investments each year.

Disadvantages

• Rewards are often limited to people who have good credit, which some might perceive as a disadvantage.
• Some credit card goodies are only rewarded if you pay off your credit card in full each month.
• With travel rewards, sometimes you can redeem air miles only at particular times and seats purchased with air miles are sometimes limited. As well, black out periods can apply—and too often are—during peak seasons like Thanksgiving, Christmas, mid-winter travel, and Easter.
• Cash back offers usually have a ceiling and so, even though you may spend thousands, you can generally only earn up to several hundreds of dollars in cash rebates (a pretty small disadvantage!).
• Cards can be paired with specific banks or merchants. So, even though you may want to put your cash back towards an IRA or your mortgage, your particular card or bank might not carry that option.
• Sometimes the offers aren't as good as they seem, or they're the same offers that anyone can get, with a bit of wrangling—this is especially true of car rental and hotel room discounts.

Am I getting the best deal?

The way to make sure you're getting the best bang for your credit buck is to read the rewards program carefully. Not every card will have the deal you want—but almost all cards offer something valuable. For someone with good credit, credit reward programs really are a dream come true.

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