Cards that promise you points and cash back might not be all that rewarding
Some rewards cards will pay you cash, but often there's a ceiling on the maximum payout each year. Other cards promise points for every purchase, but they may expire after just a year. Still others reward some purchases, such as gasoline or travel, far more than food or pharmaceutical purchases.
The rules can be confusing, according to separate studies released yesterday by Consumer Reports and Bankrate.com. Unwary consumers may be better off passing on some of the rewards programs, they conclude.
That's because the rewards and cash-back cards often carry much higher interest rates than other cards and may have so many restrictions that it's hard for consumers to claim a payout.
Consumers who don't pay their cards in full each month, for example, may find that "if the [interest] rates are high, the cost to carry a balance will often erase any savings the rewards program may offer," said Amanda Walker, at Consumer Reports.
The study published in Consumer Reports found that 85 percent of Americans participate in at least one rewards program. Some offer rewards at a particular retailer; others double as credit cards that can be used anywhere. About 3 percent of those surveyed participated in 10 or more programs.
"Along with the dizzying number of programs have come increasingly complex rules, restrictions, and limits on how much you can earn," the magazine says.
Consumer Reports said the best cash-back cards include American Express' Blue Cash, the Chase Freedom Visa, and the Discover More cards.
But these cards weren't without limitations. For example, Blue Cash promises 5 percent cash back at supermarkets, gas stations, and drugstores and 1.5 percent elsewhere. But you have to spend $6,500 annually to get those rewards. If you spend less, it's 1 percent and 0.5 percent.
The magazine said the best gasoline cards included Cash PerfectCard MasterCard, Discover Open Road, and the Platinum Select MasterCard.
Bankrate.com looked at the cash-back offerings of nine top credit card issuers. Several offered four of more cards, often cobranded with Visa or MasterCard. A handful had annual fees, which make sense only for consumers who spend a lot of money on their cards, Bankrate.com said.
A variable was how the payout was made. "You might get a statement credit, a check in the mail, a gift card or certificate, or even a deposit into a financial account," it said. Some cards, such as Citi Cash Returns MasterCard from Citigroup, pay out automatically, but consumers holding HSBC cash-back cards have to request the rebate.
Some include expiration dates on rewards, others have a cap on cash back - generally from $300 to $600 per year.
"Look for cards that match your spending style," the study concluded.
Eileen Alt Powell is an Associated Press business writer.
