The Washington Post

Here’s how to stop wasting your credit card rewards

(Daniel Acker/BLOOMBERG)

If you've ever tried to redeem your credit card rewards only to learn that the points you've been saving have lost their value, this post is for you.

Card issuers lure consumers into rewards programs with the promise of travel points for every dollar spent or cash back on everyday purchases. But the contracts are often riddled with restrictions buried in the fine print -- which is why a third of the $48 billion in loyalty rewards dispersed every year are never redeemed, according to a new study by Hidden terms of these deals, such as quarterly sign-up requirements, effect your ability to even earn rewards.

CardHub examined credit card rewards programs offered by the 10 largest issuers to figure out how prevalent earnings and redemption restrictions are in the industry. Each card was scored based on such things as the minimum amount you need to spend to earn rewards and whether points expire when you haven't swiped your plastic in awhile (yeah, card companies do that). Cards with the fewest limitations received the highest scores.

Capital One cards have the fewest reward limitations, while the "Discover it Card" had the most, according to the study. In fact, Discover received the lowest score in a couple of categories, including expiration terms and earning rewards. Meanwhile, Barclaycard, Capital One and Wells Fargo were high scorers for not capping the amount of points or travel miles you could earn or demanding you sign up to the program every three months.

One of the most common limitations among all of the cards is the requirement that consumers hit a minimum threshold of points before they could be redeemed. Another common restriction is the expiration of rewards after a payment is missed.

The 2009 CARD Act did away with a lot of the worst bait-and-switch practices in rewards programs, including unexpected changes in the terms of the agreements. Yet a Consumer Financial Protection Bureau report last year said the terms of many programs remain "highly complex" and "confusing." The bureau is reviewing the transparency of rewards disclosures, and may take action to update the forms in the future.

In the meantime, the folks at CardHub provided some sage advice for getting the most out of your credit card rewards program. Here are a few points:

Take advantage of an initial bonus: If you have stellar credit, card companies will hand you as much as $400 in cash when you sign up for a new credit card and meet an initial spending requirement, according to the study.

Say no to cards with rotating categories: A good number of cards offer points, miles and cash back only when you purchase items in categories that change every three months. Buying groceries could earn you 5 percent cash back in February, but not in April. Some cards fiddle with the amount of rewards depending on how much you spend in a month or a year. These types of cards are tricky because they usually require quarterly registrations that you're bound to forget, which will make you earn fewer points.

Skip the Starbucks gift card, get cash back: Nothing is more satisfying than using your rewards to pay down your credit card, at least for me. Getting cash back for your purchases is the most straightforward rewards category, according to CardHub. Researchers say it makes card comparison easier and eliminates the threat of having your rewards devalued.

Danielle Douglas-Gabriel covers the economics of education, writing about the financial lives of students from when they take out student debt through their experiences in the job market. Before that, she wrote about the banking industry.



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