rewardsRewards cards.  They sound nice but ultimately end up unrewarding….unless you are a traveler.   While the 2010 federal credit card reforms requires card issuers to be up-front about most card fees and terms—those consumer protections don’t apply to rewards programs that offer cash back, points, airline miles or similar perks.  Issuers still can change program terms with little or no notice and hide confusing rewards rules in the small print…..and they do!

Rewards card issuers can unilaterally declare that rewards points or miles suddenly are worth less than in the past. They quietly can add new rules that allow points or miles to expire. And they can impose rules that cause rewards balances to be forfeited when consumers make missteps, such as being late with consecutive payments.  They are not your friends, folks.

Generally, rewards cards that offer points are unrewarding.   If you are looking for tangible rewards, choose cash-back cards over rewards cards that offer points or airline miles. Issuers cannot devalue the cash you already have accumulated in a cash-back card rewards account.    But there are some other gotchas that you need to be alert to:

Annual fee. Does the card come with an annual fee? Many rewards cards do not charge annual fees, but some do. If a rewards card comes with annual fee, will you be able to spend enough and earn enough rewards in a year to offset the annual fee?

Rate of rewards. How quickly can you earn rewards with the card? Will you earn one rewards point or mile for every dollar you spend with the card? Or will you earn two rewards points or miles for every dollar that you spend?

Time Period.   How quickly can earn money back with a cash-back card?  Do you earn 1 percent or 2 percent cash back with every purchase you make with the card?  How quickly can you cash in your rewards dollars, miles or points? Do you need to reach 5,000 or 10,000 or 25,000 rewards points or miles? Can you snap up that cash-back reward at $25 or $50?

Your spending habits. Do you charge a lot or a little with your credit cards? How long will it take you to charge your way to a reward?

Ultimately, there are few, if any, rewards cards that we recommend.   Perhaps the best one for general consumer use is the Costco “True Earnings” card from American Express.  It “rewards” you 3% on gas, 2% on restaurants and travel and 1% elsewhere.  It’s true that, for each of those categories, you can find slightly stronger rewards rates with some other cards  but we still recommend this one because this card’s rewards are so well-rounded. And, with a Costco membership, there’s no annual fee.   Costco’s AmEx business card offers more lucrative cash-back deals for gasoline.  Both of these cards come with AmEx’s attractive benefits such as car rental loss and damage insurance, travel assistance, extended warranty service and purchase protection.

If you are a traveler, you can make rewards cards work for you.  But it takes work.  Kiplinger recommends the Barclay World Master Card, touting its 40,000 miles if you spend $1000 in the first three months. However, 40,000 miles doesn’t buy you what it used to buy you and many airlines are getting stingier with their travel rewards programs.   It also has no foreign transaction fee and includes travel insurance.   Harry Campbell suggests the Chase Sapphire with its 55,000 point sign-up.

Among the worst rewards cards are the Visa Black Card:  This is just a grossly overpriced attempt to capitalize on the social cache of the “black card” name.  In return for paying a $495 annual fee, you get 1 point per $1 spent, airport lounge access, the vague promise of luxury gifts, and the opportunity to earn 25,000 bonus points if they can manage to spend at least $1,500 during the first 90 days.

Similarly, the American Express Platinum Card costs you  $450 per year and gets you one year of Amazon Prime (a $79 value), no foreign transaction fees  (a 2% savings) and 25,000 reward points (which would buy you a hairdryer on AmEx’s rewards site).   That’s one VERY expensive hair dryer!

Retailer Rewards Card:   Cardratings.com warns against retailer rewards cards.  The interest rates tend to be very high:  the APR is either 25.24% or 27.99%, and the default rate is 29.99%.  The rewards programs may seem decent, but strict rules often punish you with potentially huge amounts of accumulated interest.  Watch out for the ‘special’ 0% financing offers,  as they can be very expensive if you fail to pay your entire balance off by the end of the promotional period.

Ultimately, the savvy and diligent consumer can make some of these rewards cards work to their favor. But it takes a lot of work/research.   For most consumers, rewards cards will prove to be disappointing.   If you wish to play the “rewards game”, yourpfpro.com and bankrate.com offer some useful insights into the best rewards cards deals.   Happy gaming!