Credit Cards With Rewards: Are They Worth It?

Credit cards with rewards or without? Chances are you've wondered which one is the best deal for you in the long run. Perhaps a little background will help you decide.

You know what those rewards are: frequent flier miles, points that you can redeem for merchandise or discounts on travel, a cash-back rebate at the end of the year. Those rewards are very tempting, aren't they?

However, you need to remember that those rewards aren't free. Unfortunately, the saying is true, There's no such thing as a free lunch.

In order to gain those rewards, you will have to pay somewhere down the road, because the credit card company has to pay to give them to you. For instance, you may end up paying a higher interest rate or a higher annual fee for the privilege of using that card. Those higher costs pay for the rewards you covet.

Likewise, if you use get frequent flier miles, you may have to meet certain restrictions in order to use them. Or, that discount you get for a hotel room may still result in a higher hotel bill than you would have gotten at a competing hotel.

That's not to say that all rewards programs are bad -- on the contrary. They can be very beneficial if you travel a lot or face other circumstances in which you really do need to use your credit card. You really can gain by using your card wisely.

Wisely is the key word here. Don't fall into the trap of running your card through the store scanner at every opportunity just to gain the rewards. You will still have to pay the balance eventually, including interest if you don't pay it at the end of the month.

You also need to compare rewards programs. Frequent flier miles won't do you any good if you don't fly all that often. Neither will gift cards to luxury department stores if you don't have one in your area. Rewards will do you absolutely no good unless you can use them.

On the other hand, if you have the goal of taking a once-in-a-lifetime trip, consider using a card with a rewards program that will help make that dream come true. Likewise, if a loved one is getting married soon, use a card with a rewards program that will allow you to give an extra special gift.

As with anything, it pays to carefully read all the fine print and compare offers. Consider whether the interest rate and various fees will offset the rewards or vice versa. Don't sign up for every reward program available ñ creditors will note if you have a plethora of cards and may downgrade your credit score for doing so, recognizing that you could potentially rack up a lot of debt suddenly.

Do your best to pay your balance each month and don't overuse the card.

So, should you look for credit cards with rewards? That depends on what you want. Carefully weigh all the options and choose the card that meets your goals.