Q. My new rewards credit card sounded great, but my cash back has been less than rewarding. How do I get the real scoop on these plastic promises?
A. You're not alone in your disappointment. Although cash back, free air miles and other incentives sound great, there are so many strings attached to reward cards that both Consumer Reports and Bankrate.com conclude in recent studies that most folks are better off with no-frills plastic—especially if they carry a balance.
Reward cards typically have higher interest rates and annual fees, and rewards are often capped. Rewards may also be contingent on your meeting high spending minimums ($6,500 a year in the case of CR's top cash-back pick, AmEx's Blue Cash). And restrictive or confusing definitions of what’s included in cash-back promises may mean that cash back on travel charges may not apply to airlines, gasoline or rental cars. Maybe that's why nearly half of rewards cardholders never or rarely bother to use their paybacks, according to a 2006 GMAC Mortgage and Harris Interactive survey.
Review rewards credit cards here or visit any of these websites: credit.com, creditcards.com, indexcreditcards.com and cardtrak.com. Realize, however, that the terms published on those websites are typically provided by the card issuer, so expect the small-print restrictions and loopholes to be omitted.
Sid Kirchheimer is the author of Scam-Proof Your Life (AARP Books/Sterling).