July issue offers tips to select the right programs and reap the most rewards

YONKERS, NY— In tight economic times, savvy consumers may look to rewards programs for relief when buying essentials, but Consumer Reports’ July issue finds reaping real savings can be tough, and even the more generous programs have limits on how much consumers can earn.  

To keep shoppers coming back and spending more, supermarkets, drugstores, warehouse clubs, gas stations, bookstore chains, and many other retailers are pushing points programs.

About 85 percent of U.S. households participate in at least one rewards program. A recent poll of Consumer Reports Money Adviser subscribers found that 41 percent of the newsletter’s subscribers carried three to five such cards, 9 percent had six to nine of them, and 3 percent somehow found room on their key rings or in their wallet for 10 or more.

Consumer Reports finds that along with the dizzying number of programs have come increasingly complex rules, restrictions, and limits on how much consumers can earn—making many of the programs not worth the bother.  

“Carrying the right cards and ignoring the rest can save you a little money on your purchases, but consumers must choose programs that compliment their spending habits,” said Amanda Walker, senior project editor at Consumer Reports.

Some rewards cards do double duty as credit cards. Cash-back, gas, and grocery rewards credit cards can offer some relief for costly essential items, but often carry higher Annual Percentage Rates than traditional credit cards. Looking at some of the more generous credit card rewards programs, CR found that rates varied from 9.74 % to as much as 19.99 %. 

“If the rates are high, the cost to carry a balance will often erase any savings the rewards program may offer,” Walker said.   

A look at some of the more generous cash-back, gas, and grocery store credit card rewards programs is online at www.ConsumerReports.org.

Getting the most from rewards Programs:

For consumers looking to reap the most rewards and avoid the traps, Consumer Reports offers the following advice:

• Consider where you shop. Save your key ring or wallet space for cards that will earn rewards at stores you use most often. 
• Project your spending. Translate the amount you’re likely to spend into cash back or points, depending on the program. If it’s points, find out how many you need to get something you might want. If you’re using a credit card, subtract the annual fee, if any. If that calculation shows you’d have to spend a fortune to earn a pittance in rewards, you might want to use another card.
• Favor cash back. You might never redeem your points, so at least you will get something. Plus cash-back cards tend to be more generous in their rewards, CR’s research has found.
• Skip credit if you carry a balance. Rewards credit cards often charge relatively high interest rates, which will eat up your reward (and then some) if you carry a revolving balance. The issuer can also hold points hostage or stop adding to them if your payment is late.
• Do the math on do-good programs. Cards that give your reward to a charity usually pay only about 25 to 50 cents for every $100 you spend. And you can’t write off the donation on your taxes. Both you and the charity might do better if you use a more generous rewards card, keep the money, and just write the charity a check.
• Use airline miles fast. Cashing in frequent-flyer rewards has become more difficult because airlines have cut flights and now have fewer seats available. So rack them up and use them up as quickly as possible. Airlines also change their rules frequently, and several big carriers have recently gone bankrupt.
• Avoid temptation. Research has shown that people who use rewards cards charge more. It’s easy to overspend just to earn a new digital camera or set of golf clubs. Beware.

For more information or to see a complete breakdown of some of the more generous credit card rewards programs, consult the July issue of Consumer Reports, on sale June 3.  The report is also available to subscribers at www.ConsumerReports.org.