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More Credit Card Rewards Programs Have Annual Fees

by Francine Huff

Thinking of signing up for a credit card rewards program? Rewards programs are popular with many cardholders because they allow you to earn cash back, trips, and other items. But make sure you understand all the terms and conditions before signing up, because some rewards cards have annual fees.

Paying for Credit Card Rewards

About 28% of rewards credit card offers had annual fees in the third quarter of 2009, up from 21% a year earlier, according to Synovate, a market research firm. More credit card rewards programs are expected to require annual fees, especially if they are co-branded with a hotel or airline.

More Annual Fees in the Future?

Credit card rewards are usually offered to people with good credit. Most basic rewards cards don't have fees, but it appears that more credit card companies may begin offering deals that require annual fees as they cope with credit card reform legislation, according to the Associated Press.

Compare Credit Card Deals

So, should you accept a credit card with rewards? That depends on what you plan to use the card for and what's being offered. Many people end up charging more on rewards credit cards so they can accumulate a lot of points. This may result in taking on too much credit card debt. Take the time to examine the deals being offered before filling out a credit card application.

Ask yourself whether you really want the items being offered as rewards. For instance, airline miles and hotel stays are only good if you actually plan to travel. A credit card that offers points to pay on a mortgage could be useful if you want to pay off your home loan quicker. A rewards program that offers merchandise such as books or CDs may seem like a good deal, but if the rewards program requires you to spend a couple of thousand dollars to earn enough points for one book, maybe you should rethink that.

Credit Card Rates

When evaluating credit card offers, pay attention to credit card rates. These include the annual percentage rate (APR), billing cycle, and other fees. Review the rules for cash advances and balance transfers if you plan to use them, because they usually have higher interest rates than standard purchases.

Credit card rewards can pay off for some people, but it's not wise to sign up for a rewards program without reviewing all the terms and conditions.

Published 12/01/09 (Modified 03/01/11)

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