Wouldn't it be great if you could have a
single credit card
that gave you the best rewards for everything? Unfortunately, that
sentiment seems to be a pipe dream, as credit card companies are
doing everything they can to carve out narrow niches that give you
maximum cash back
only on very limited items.
Should you pay for rewards?
In the latest move in the card industry,
) has made some major changes to its Blue Cash card. Blue Cash,
which had no annual fee, has been particularly popular among those
who spend a lot on their credit cards, because until now, the card
offered a 5% rebate on gas as well as purchases at grocery stores
and drug stores -- but only after you had already made at least
$6,500 in annual purchases with the card.
With the changes, however, cardholders have a choice of two
cards. One card, dubbed Everyday, gives 3% cash back at grocery
stores, 2% at gas stations and department stores, and 1% on other
purchases. This card comes with no annual fee.
The other card, called Preferred, has a $75 annual fee. But in
exchange for the higher cost, the Preferred card gives enhanced
rewards. Cardholders get 6% on groceries and 3% at gas stations and
department stores, with 1% still applying to other purchases.
A big juggling act
The challenge in trying to manage your credit cards to make the
most of available rewards is in navigating all the moving targets.
Although American Express appears to be keeping its rewards stable
with its new Blue Cash card, many issuers make things a lot more
) , and
(NYSE: JPM) all have card reward programs that have rotating
categories each quarter. So for instance, in one quarter, a card
may give you a 5% reward for purchases at grocery stores; but the
next, that reward may drop to 1% while another category, such as
home improvement store spending, moves up to 5%.
Such programs add enormous complexity -- and hassle. Typically,
you have to track your spending, because they usually include
limitations on how much you can spend that qualifies for the higher
reward amount. Moreover, you often have to enroll for each
quarterly program separately -- with no option for automatic
enrollment. Forget to sign up, and you can kiss those extra rewards
goodbye. And finally, if the store where you shop somehow gets
miscategorized, your credit card company may not recognize your
purchases as qualifying for the bonus reward amount.
At least they're still paying rewards
Nevertheless, as difficult as it is to navigate some rewards
programs, they still represent found money for customers. And with
banks struggling to find ways to make back lost revenues from
credit card reform and
limitations on interchange fees
for debit cards, card issuers including
(NYSE: WFC) and
stopped offering rewards entirely
on debit-card purchases.
As for the dilemma raised by increased rewards in exchange for
an annual fee, AmEx isn't the first company to force cardholders to
consider that issue.
) pitched a card last year that offered double rewards miles for
those willing to pay a $59 annual fee. In the end, whether it makes
sense to pay up for extra rewards is a simple cost-benefit
question: Will you earn more in rewards than you pay in annual
fees? If you track your credit card purchases -- or have access to
old statements to go back and review them -- then it should be
fairly easy to do the math and come up with the right answer.
Be a smart cardholder
While many credit card users struggle under mounds of debt,
responsible cardholders have access to just about any card they
want. The rewards game may be getting more complicated, but it's
also more lucrative for those willing to figure out the rules.
Want to more about making the most of your good credit? Check
out the Fool's Credit Center and get more great tips on how to
manage and improve your credit.
always stops for free money. He doesn't own shares of the
companies mentioned in this article. American Express and Discover
Financial Services are
Motley Fool Inside Value
picks. The Fool owns shares of JPMorgan Chase and Wells Fargo.
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