by Lynette Alice

Created on: March 28, 2010   Last Updated: April 02, 2010

Everyone loves credit card rewards programs - especially credit card companies. The reason credit card companies love rewards programs so much is because they help lure people into spending more money and spending more frequently and they know nearly no one ever actually maxes their rewards out. Even when they do max their rewards out they know they are likely to still do okay because people choose less than advantageous ways to claim those rewards.

Thanks to credit card reform laws passed in 2009, rewards programs were an easy place for banks and credit card companies to trim, adjust, and recoup some of the estimated $15 billion lost to credit card reform. With tighter restrictions and less advantageous rewards programs, how do you make the most of them?

The first tip is to forget about miles and points and take the cash if it is an option. Cash back programs may not seem like the best deal at first glance, but recall that many changes have been made and now many credit card companies charge a back end fee to use miles. Others have gone the route of avoiding a back end fee by making it harder to accrue enough miles to be able to cash them in meaning you are paying more than you used to in order to get a "freebie."

Then consider that even in points programs that reward gift cards and tangible goods, when the cost per point is calculated most people are paying in the neighborhood of 20% over retail to get something. HSBC is a perfect example with their $50 California Pizza Kitchen gift cards which cost 6,000 points. That rate actually works out to $10 more than it should or would have in early 2009 for the same exact deal.

Watch out for deals that have been slashed - even American Express cut some corners on their cash back programs. Their Blue Cash Card was reduced from 1.5% cash back to 1.25%. Chase went a different route with their Freedom Card. The Freedom Card used to offer 3% rebates in your highest spending categories but that was amended to a deal that rotates categories now. Sure you get 3% rebates still - you just have to vigilantly monitor what categories count now so you don't miss them and get left earning 0% which defeats the purpose of your using the program all together.

Finally beware of programs that seem to good to be true or that you will not spend enough to truly take advantage of. A rewards program is only good if you are actually spending money regularly. While the Chase Sapphire Card looks great, assuming you can qualify for it, it also

• 1
• 2
• Next Page >>