When a credit card claims it offers "rewards," make sure you're the one benefiting from it - and not the credit card company.
If you always pay your credit card balance in full and on time, you deserve to be rewarded for your loyalty – your credit card should pay you.
The market for reward credit cards has become extremely competitive this year, as we’ve previously reported (Rewards Return for Some Credit Cardholders). But that hasn’t stopped banks from offering some truly awful products.
In no particular order, here are what I consider the seven worst reward cards, along with some advice that will make you a smarter credit card shopper…
Why it’s bad: This card earns you a pathetic .5 percent return on most purchases, and the rewards only come in the form of gift certificates to be used at their store.
What to look for: Any respectable reward card should return at least 1 percent cash back, or a much higher percentage if it’s just offering store credit.
Why it’s bad: While offering numerous redemption possibilities is a good thing, deciphering Bank of America’s Worldperks program’s details could be the subject of scholarly research. Hidden in the pages of terms and conditions are fees that are only “disclosed at the point of redemption.”
What to look for: The ideal reward card offers a simple formula for returning value to the card holder and any fees should be clearly disclosed in advance.
Why it’s bad: This card is marketed to young adults who are rewarded with 25 cents worth of bonus points when they pay their bill on time – since a shiny quarter is what every kid dreams of, right? On the other hand, failing to pay your bill on time will result in a penalty APR of 29.4 percent and late fees of up to $35.
What to look for: When looking for a reward card, beware of negligible rewards that are meant to distract you from harsh terms.
Why it’s bad: This retail behemoth’s card offers 1 percent cash back, just like most other Discover cards. Unlike some others, however, there are no bonus categories of spending – even for purchases at their own stores!
What to look for: The entire point of obtaining a reward card affiliated with a store you frequent is to obtain more cash back when you shop there.
Why it’s bad: Like Capital One’s MTV Card, this card offers students a trivial “reward” of 5 percent off of their interest charges for paying their bill on time. Discover also offers “up to” 1 percent cash back as a reward, but the fine print reveals that your first $3,000 a year in spending only earns .25 percent cash back – a mere $7.50.
What to look for: Beware of weasel words like “up to,” and closely read the credit card terms to find the catch.
6. Delta SkyMiles and SkyMiles Options (American Express)
Why it’s bad: The SkyMiles and SkyMiles Options cards offers applicants pathetic sign-up bonuses of only 5,000 miles and 1,000 miles respectively. Yet Delta and other carriers offer cards that include sign-up bonuses of 25,000 miles or more. Worse, neither of these Delta SkyMiles cards offer the checked-bag fee waivers granted to holders of all other Delta cards.
What to look for: Before applying for an airline-affiliated credit card, make sure you are choosing the version that offers the largest sign-up bonus, the most fee waivers, and other perks.
Why it’s bad: Like the Wal-Mart card, United misses the point of a loyalty program by not offering additional miles for purchases from United. Furthermore, this card offers a one-way, domestic, 1,000 mile upgrade certificate – but it’s only valid on pricey full-fare tickets.
What to look for: Before being tempted by credit card perks, be sure to investigate them to determine if they truly add value. Other questionable credit card perks include companion airline certificates that also require full-fare tickets and hotels that offer discounts off of their inflated “rack rate.”
What you should do
Most card issuing banks and their affiliates are trying hard to win your business with truly valuable perks, but those same banks might also offer less-enticing cards. Any competitive offer will provide a sign-up bonus with true value, followed by a reward valued at 1-2 percent of your spending.
If you have one of these sub-par rewards cards, now is the time to end your unrewarding relationship and upgrade to one of the many outstanding reward cards being offered. How do you find them? One way is through the Money Talks News Card Card Search. Check it out!