Finance Globe

U.S. financial and economic topics from several finance writers.
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Rewards Cards Restrictions to Watch Out For

The saying “It’s too good to be true” is never more evident than with credit card reward programs. Clever marketing makes many credit card reward programs seem like you’re getting a great deal, but there’s typically a catch that you won’t realize unless you dig deeper.

Tiered Rewards and Thresholds

The tiered reward system is common with cash back rewards credit cards. The cards promote a certain percentage, say 3%, but you only earn that highest percentage after you’ve charged a specific amount on your credit card in a year. Before that, you might earn rewards at a paltry rate, like a percentage or even a fraction of a percentage. If you’re not a big credit card spender, you may never earn that highest rate.

More Rewards on Certain Categories

Some credit cards only allow you to earn their highest reward on certain categories on purchases. With the Discover More, for example, you earn the maximum 5% cashback on categories that change throughout the year and a smaller percentage on all other purchases. The higher-earning categories on these types of reward programs may not be broad enough to allow you to earn the maximum rewards.

Maximum Reward Amounts

You might only be able to earn the maximum reward on a certain dollar amount of purchases each year or month, for example, 3% cash back on the first $300 in purchases each month. After that, you’ll earn rewards at a lower rate or not at all. This is basically a tiered reward system that lets you earn the maximum reward upfront rather than later.

Rewards That Expire

Read your reward program terms carefully to see whether you’re required to use your rewards within a certain period of time. Rewards may expire if you don’t redeem them in a timely manner. Some credit card issuers also expire rewards if your credit card remains dormant for a certain period of time. Luckily, most reward expirations are typically after several years instead of just a few months. Most card issuers will forfeit the rewards you’ve earned if you fall behind on your credit card payments.

Redemption Increments

You may only be able to redeem your rewards in certain increments, like $25 or 250 points. With the Citi ThankYou rewards program, you can only redeem cash rewards in increments of $50 or $100. The higher redemption limit means it could take longer to accumulate a reward you can actually use.

Rewards That Cost

You have to be careful that you’re not funding your own rewards either through a high annual or through interest paid on your balance. No annual fee rewards cards are more common these days, but there are still several premium rewards credit cards with annual fees of $50 or more. With cards like that, you don’t really start earning rewards you until you’ve out-earned your annual fee. And since rewards cards often come with a higher interest rate, it’s best to pay your balance in full. Otherwise, interest may cancel out the reward you earned.

Read The Fine Print

You won’t get the full story on any credit card rewards program until you dig deeper and read through the entire rewards program guidelines. You can find many of the reward restrictions by reading the program’s FAQ. Look for the asterisks and always search the program’s website for the fine print.

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Saturday, 28 January 2023

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