3 On Your Side: Reward Card Warning
PHILADELPHIA (CBS) -- Do you prefer points or getting cash-back? When it comes to reward cards, most sound like a great deal. But as 3-On Your Side Consumer Reporter Jim Donovan finds, you need the right strategy to actually reap the best rewards.
After scaling back during the recession, the credit industry is coming back. At the end of last year credit card offers were up 206 percent from 2009 and many of them can be enticing.
Jen Larson might like to shop on her lunch hour, but getting rewards on her credit card makes it even better. She says, "I love it, it's an added bonus, it's a good way to get an airline ticket with purchases I would make anyways."
But you need to be choose carefully. Marketing Executive Glenn Kelley says, "Rewards credit cards carry higher interest rates. Consumers have to be careful that they might get one percent in cash back or some rewards, when they really do the math and they compare what their interest rate is versus other types of cards."
Then there's the annual fee to watch out for. Edgar Dworksy of Consumer World says, "I would never pick a rewards card that has an annual fee, now with the pressures that banks are under to find other sources of income, more rewards cards are going to have fees."
While the rewards can sound good, you really need to make sure you'll really be able to redeem them. Kelley says, "A lot of these cards put expiration dates on them, so as you are accumulating points, you want to be careful to make sure that you use the points before they expire."
A recent study found that shoppers with new rewards cards, within the first three months, spent $79 dollars more each month. They also accumulated $191 dollars of additional debt, all to earn just $25 dollars in rewards.
