Deciphering the rewards system
Credit card companies offer various incentives to sign up new customers, but cashing in can be hard work
Yes, the economy's hurting. But credit card companies still want your business - especially if you have a good credit score. Card issuers dangle all sorts of incentives to convince people to sign up for their cards. Airline miles, hotel points, and cash back are among the most common.
We took a look at some cash-back offers to see the differences and to find out what consumers should look out for when shopping for a card. For an expert look into these deals we worked with CreditCards.com - a site that collects card offers, sorts them, and highlights the cards' benefits.
"People get motivated to spend and associate loyalty with credit cards of all sorts," said Ben Woolsey, marketing director of CreditCards.com and a former credit card company executive.
Some people prefer to earn points on cards to chase free hotel rooms or plane trips, he said, for the "psychic reward" of achieving something. These cards also serve as motivation, he said, for people to spend more.
Woolsey said the bonus cards are not for everyone. Those who carry balances shouldn't go down that road, he said.
"If you carry a balance month-to-month don't even look at reward cards," Woolsey said. "Even if you have great credit you will have a higher APR versus a nonrewards card. The banks are essentially getting the people that pay interest to subsidize the reward program. People that revolve balances don't realize that. The people that pay off their balance every month get a free ride."
So, if you're a consumer who pays the credit card bill when it arrives, here's the good news: You can get cards that deliver money back, or you can really work the system to get a great deal.
Woolsey pointed out that credit card issuers are well aware that few will make the effort to take advantage of all the deals on certain cards, which is why they dangle them. So, the Globe's choice for top cash-back offer is the HSBC Weekend Card.
Mondays through Fridays, no matter what the purchase, the card will accumulate 1 percent cash back on all purchases. Purchases on Saturdays and Sundays are rewarded at 2 percent.
Not all cards offer a base figure. Discover Card, for example, has a tiered system of rewards depending on how much you spend, starting off a lot lower than 1 percent. But, they also offer cash back of up to 20 percent on certain purchases made online through their site.
Many cash-back cards had decent offers, often dangling no-interest balance transfers and low interest rates for those with the best credit scores. Woolsey urged consumers trying to earn rewards to avoid cards that charge annual fees and to consider opportunities to increase their rewards by accepting gift cards rather than cash - if they intend to use them.
APR as low as 8.99 percent
Pros: Easy to understand reward system with at least 1 percent back on each purchase and 2 percent back on weekend spending.
Cons: Do you really need another credit card?
Final word: If you're going to go into the cash-back card arena, you know what you're getting.
CITI CASH RETURNS
APR as low as 9.99 percent
Pros: A minimum of 1 percent back on all purchases and other choices available that can boost that.
Cons: Having to keep track of all the deals that can get you more than 1 percent back. Buying online from specific retailers, for instance, can return up to 5 percent.
Final word: Not a bad choice.
CAPITAL ONE NO HASSLE CASH REWARDS
APR as low as 13.90 percent
Pros: At least 1 percent back on all purchases and 2 percent back when buying gas or groceries.
Cons: You have to use the card to buy groceries to get the biggest benefit. The interest rate is higher than many competitors should you end up carrying a balance.
Final word: It's an OK deal as long as you avoid having to pay that high interest rate.
CHASE FREEDOM
APR as low as 14.99 percent
Pros: Earn a $50 credit with your first purchase, get 1 percent back at a minimum, and earn 3 percent back in your top three categories in which you spend the most money.
Cons: Very high interest rate compared with some of the top cards in the category.
Final word: A tempting offer that should be avoided by anyone who carries a balance.
DISCOVER OPEN ROAD
APR as low as 10.99 percent
Pros: Many opportunities to earn cash back at high percentages. Ability to double rewards by accepting gift certificates.
Cons: Cash back starts at 0.25 percent on your first $1,500 in purchases. You have to really study the rules to take advantage of this card - for instance, getting back 5 percent on gas and auto maintenance.
Final word: Only worth it to someone fully committed to taking advantage of all the opportunities. 