Be Sensible about Credit Card Reward Points

About three years ago, my family took a wonderful trip to Disney World in Florida for my son’s fifth birthday. I had a significant number of reward points about to expire on a debit card I had with a financial institution where I used to work. That was how I chose to use them. What ended up being a $2,500 trip cost my family about $500. The other $2,000 was paid for by my reward points. At that point in our lives, there’s no way we could have taken that trip without those points.

There aren’t many debit card programs out there which offer this level of reward. Most are credit card programs designed to get you to use your credit card more frequently. That’s great if it works in your favor, but you really need to read the fine print before signing on the dotted line. Here are some questions you should ask before applying for a reward credit card.

1. Is There an annual fee and how much is it?
If you are paying for your rewards, it’s not really a reward, is it? If the fee is small, say $25, be sure you are getting more than that amount back in rewards.

2. What is the card’s interest rate?
Many reward programs charge a higher interest rate to help them pay for your supposed rewards. If you pay your balance in full each month, it’s doesn’t matter how much interest they charge, because you won’t be paying interest. Just be aware of how much you are paying in interest and how that compares to the value of the rewards available.

3. What happens if you miss a payment or make a late payment?
Many programs take your points away if you’re even one minute late with your payment. Some will offer you the chance to buy them back, but again, is that really a reward if you’re buying it with your own money?

4. Do reward points expire and how long do you have to use them?
It’s pretty common for rewards to have an expiration date. Be sure you have enough time to rack up the points for the reward you want and actually use them before they will expire.

5. How do you earn rewards?
On my debit card, I earned one point for every dollar spent on a retail purchase. Some credit card programs work that way, and some work completely differently. Be sure the things you buy regularly are covered by the rewards program so you can maximize the rewards you earn.

Whether it’s cash back, travel points, gift cards or merchandise that you want, you will find good credit card reward programs and questionable ones. Know the rules and conditions before you apply and choose the program that will do the best job of earning you the rewards you really want.