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Credit Card Rewards Programs

January 4, 2019 | Posted in: Insights, Wealth Strategies

Stop the madness! Making sense of credit card rewards programs

Can you recall how many solicitations you have received from credit card companies lately? Is the number higher than seems possible?  Does the last offer sound better than the one before?  If you have answered yes, keep reading as we hope to shed some light on the overwhelming array of credit cards and the rewards that often accompany them.

As a quick primer, rewards programs are made possible by the underlying fees that are charged by banks when credit cards are used. The amount of these fees averages about 2% of the value of each credit card transaction.  Merchants know and understand that these costs are part of doing business and price their goods and services accordingly.  Your goal with a rewards program should be to get as much of that fee back as possible.

The complicated part is deciding what type of reward program offers the best chance at maximizing the benefit to you. Rewards can be tied to purchase categories like gas, groceries or travel and they can be redeemed in multiple forms like cash back, merchandise discounts and frequent flier miles.  Some cards charge an annual fee for the right to participate and others do not.  Where does the consumer turn to make sense of it all?

Understanding your credit score is a great starting point. Many card issuers offer preferred or reserve cards for those with the best credit.  These cards typically offer lower interest rates and higher credit limits so it is important to know where you stand.  Myriad online resources exist to help consumers monitor their credit scores.  Even if you are not seeking a new credit card, we believe that it is wise to keep a close eye on your credit score.  The Consumer Financial Protection Bureau offers valuable tips which you can read by clicking HERE.  Also, a web search using the question “how to find my credit score?” will reveal many helpful options.

Next, consider how you will use the card and your own spending habits. If you plan to pay your card balance in full every month you may not be concerned about the interest rate of your card.  Instead, you may want a card with the most generous reward rate.  On the flip side, if you carry a balance or if you are transferring a balance then the interest rate and the balance transfer terms will be of higher importance.  If you plan to use your card often and expect a high dollar volume it might be wise to consider a card with an annual fee.  In some cases the fee can “pay for itself” in the form of added benefits.  Some examples are improved customer service, concierge services and access to special events.

Thankfully there are a number of websites including, that consumers can use to compare credit card offerings.  Many of these allow you to sort by different factors such as credit score, fee structure, rewards rate, etc.  Once you narrow your selection, it may also pay to visit the site of the credit card company to check for additional information or promotional offers.

Last but not least, remember that you don’t have to settle for just one card. While you may prefer a cash-back card as your primary one, it may behoove you to hold a separate card issued by a favorite airline or retailer that offers added incentives to their customers.  Obviously, there is a limit to how many cards one should carry, but a mix of cards may increase your overall capture of the 2% fee.  If nothing else, it may allow you to board your next flight earlier if you can answer “What’s in your wallet?” correctly.