Which Credit Card Rewards Program Is Best for You?

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Credit card companies are increasingly trying to appeal to the consumer desire for free stuff with bonuses and higher rewards for people who sign up for new credit card accounts. The average sign-up bonus is at an all-time high, according to Odysseas Papadimitriou, chief executive of CardHub.com and WalletHub.com.

If you are good at handling credit card debt, taking advantage of these offers "is a no-brainer," he said. "Otherwise, you're leaving money on the table."

The challenge then becomes finding the right rewards, which include cash back offers, airline mileage and membership points. Some cards offer sign-up bonuses, often mileage. United (UAL) Mileage Plus Explorer just came out with a limited time offer of 50,000 miles, almost double its previous bonus. But the cards that give lucrative bonuses usually offer less after that initial bonus is paid out.

Going for Cash Back

"Don't be greedy," said Jelena Ewart, NerdWallet.com's general manager of credit and banking. "Think about a lifetime of rewards. I think a long-term vision is much more appropriate for most people. Consumers can get really excited by these offers, but you may end up with a card that you don't get a lot from."

Start by reviewing your spending habits. Some of the best cash-back offers require that you identify two or three categories for the biggest rewards. For instance, you can get a larger rebate on restaurant spending, if you identify that. Some card issuers choose the categories for you (say gasoline, hotels, airlines and groceries) and rotate them every few months.

The experts say you should be able to get 1.5 percent cash back, sometimes more. "The Capital One (COF) Quicksilver card is the gold standard there," according to Ewart. "There are no hoops to jump through. You can use the cash back for whatever you want." You also get a $100 bonus if you spend at least $500 in the first three months.

Other cards sport richer rewards, but they often come with an annual fee. If you spend enough though, the larger rebate will more than offset the fee. NerdWallet, CardHub and other sites have calculators that help you do the math. They also list the best card deals available in each category, with all of the pros and cons, the fees and explanations of the fine print.

"If you're a high spender, more than $2,000 a month," says Papdimitriou, "it can save you hundreds of dollars a year."

Building Up Miles and Points

If airline mileage and travel points are your thing, you may want a card that rewards you with frequent-flier miles at a certain airline. You can earn free trips or upgrades to first class, but be aware of the many restrictions imposed on how and when they can be used.

Papadimitriou also warns that not all miles are really frequent flier miles. He says some cards offer mileage points that can only be converted into travel benefits, but there can be lots of restrictions and the conversion rate isn't always favorable. Membership points can also redeemed, at certain levels, for merchandise and other desirables.

Balance Transfers

Another reason to apply for a new card is to transfer your balance for a lower interest rate. Maybe you're paying a 16 percent annual percentage rate on your current card. Some card issuers will waive the interest payment for six months to get your account.

It's a great deal, but you have to ask yourself why they are so generous. They're betting that you will fall back into your bad old habits. If you carry a balance after that initial period, or if you miss a monthly payment, your APR could jump above 20 percent. A recent National Foundation for Credit Counseling survey found that 34 percent of consumers carry over credit card debt from month-to-month.

"A person can win at the rewards game, but you'd better play by the rules and you must know the rules," said Gail Cunningham, spokesperson for the foundation. "If you carry over a balance from month to month, you're not going to win."

All of the experts also warn that you're not going to win at the rewards game if it encourages you to spend more than you would have done otherwise. But "if you're a disciplined spender and have a track record of paying your monthly bills in full each month," Cunningham said, "then why not take advantage of the rewards?"

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