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Winning the Credit Card Rewards Game

by Barbara Marquand

A generation ago, the reward you got from your credit card was the simple convenience of being able to use it instead of cash for purchases.

Now credit card companies offer dozens of different types of bonuses, from the relatively old standbys of cash-back rewards and airline miles to points toward merchandise ranging from insurance discounts to Las Vegas show tickets.

Credit Card Rewards in for a Hit?

Credit card reform could squeeze profits for issuers by limiting interest rate hikes and fee increases, so experts predict companies might put some limits on credit card rewards. Rewards could also take a hit if Congress passes legislation that limits transaction fees that merchants pay to credit card companies.

Still, rewards are probably here to stay, and the array of choices can be overwhelming. Here's how to cull through the options to find the right credit card for you:

Credit Card Terms: Don't Overlook the Basics

• Don't get so focused on the goodies that you overlook the credit card's basic features, such as the interest rate and fees. Make sure you read the fine print of the credit card terms before you choose a card.

• Look for low interest credit cards if you think you'll carry a balance. Be honest--many people get a card, intending to pay their bill in full each month but end up carrying a balance.

• Calculate your rewards savings against the annual fee. A hefty annual fee might wipe out any cash-back bonus or merchandise value you earn with your card. Bear in mind some cards come with no annual fee the first year and a hefty fee in the following years.

Shop for Best Credit Card Rewards

• Research and compare credit card rewards. Decide which type of reward would benefit you most, such as gas or cash back, and compare cards offering that reward to get the highest bonus and best terms.

• Read the reward terms. Blackout dates and restrictions may apply for travel rewards, for instance. Some cards require you to spend a certain amount to claim a sign-up bonus.

If you need another credit card, by all means consider your reward options, but don't apply for a bunch of credit cards just to earn more stuff. Too many credit card applications--more than a couple per year -- hurts your credit score. Refrain from applying for credit cards if you're about to go shopping for a mortgage or car loan.

Published 02/02/11

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