The 7 worst rewards credit cards
With all the great rewards being offered right now, there's no reason to settle for offers like these. Here's how to compare.
This post comes from Jason Steele at partner site Money Talks News.
If you always pay your credit card balance in full and on time, you deserve to be rewarded for your loyalty. Your credit card should pay you.
The market for rewards credit cards has become extremely competitive, as we've previously reported. (See: "Rewards return for some credit card holders.") But that hasn't stopped banks and others from offering some truly awful products.
In no particular order, here are what I consider the seven worst rewards cards, along with some advice that will make you a smarter credit card shopper:
Why it's bad: This card earns you a pathetic 0.5% return on most purchases, and the rewards only come in the form of gift certificates to be used at their store.
What to look for: Any respectable rewards card should return at least 1% cash back, or a much higher percentage if it's just offering store credit.
Why it's bad: While offering numerous redemption possibilities is a good thing, deciphering Bank of America's Worldperks program's details could be the subject of scholarly research. Hidden in the pages of terms and conditions are fees that are only "disclosed at the point of redemption."
What to look for: The ideal rewards card offers a simple formula for returning value to the cardholder and any fees should be clearly disclosed in advance. Post continues after video.
MTV Visa Credit Card from Capital One
Why it's bad: This card is marketed to young adults who are rewarded with 25 cents worth of bonus points when they pay their bill on time -- since a shiny quarter is what every kid dreams of, right? On the other hand, failing to pay your bill on time will result in a penalty APR of 29.4% and late fees of up to $35.
What to look for: When looking for a rewards card, beware of negligible rewards that are meant to distract you from harsh terms.
Why it's bad: This retail behemoth's card offers 1% cash back, just like most other Discover cards. Unlike some others, however, there are no bonus categories of spending -- even for purchases at their own stores.
What to look for: The entire point of obtaining a rewards card affiliated with a store you frequent is to obtain more cash back when you shop there.
Why it's bad: Like Capital One's MTV card, this card offers students a trivial "reward" of 5% off their interest charges for paying their bill on time. Discover also offers "up to" 1% cash back as a reward, but the fine print reveals that your first $3,000 a year in spending only earns 0.25% cash back -- a mere $7.50.
What to look for: Beware of weasel words like "up to," and closely read the credit card terms to find the catch.
Why it's bad: The SkyMiles and SkyMiles Options cards offers applicants pathetic sign-up bonuses of only 5,000 miles and 1,000 miles, respectively. Yet Delta and other carriers offer cards that include sign-up bonuses of 25,000 miles or more. Worse, neither of these Delta SkyMiles cards offer the checked-bag fee waivers granted to holders of all other Delta cards.
What to look for: Before applying for an airline-affiliated credit card, make sure you are choosing the version that offers the largest sign-up bonus, the most fee waivers, and other perks.
Why it's bad: Like the Wal-Mart card, United misses the point of a loyalty program by not offering additional miles for purchases from United. Furthermore, this card offers a one-way, domestic, 1,000-mile upgrade certificate -- but it's only valid on pricey full-fare tickets.
What to look for: Before being tempted by credit card perks, be sure to investigate them to determine if they truly add value. Other questionable credit card perks include companion airline certificates that also require full-fare tickets and hotels that offer discounts off their inflated "rack rate."
Most card-issuing banks and their affiliates are trying hard to win your business with truly valuable perks, but those same banks might also offer less-enticing cards. Any competitive offer will provide a sign-up bonus with true value, followed by a reward valued at 1% to 2% of your spending.
If you have one of these subpar rewards cards, now is the time to end your unrewarding relationship and upgrade to one of the many outstanding rewards cards being offered.
More on Money Talks News and MSN Money:
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
ABOUT SMART SPENDING
Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.
Having worked as a writer, reporter and editor for more than 25 years, Editor Julie Tilsner is the sort of person who can't help but correct grammar in Facebook postings and on billboards. She's written for BusinessWeek, the Los Angeles Times, Parenting, Redbook, AOL and others. She lives in Los Angeles County with her family and loves to drink wine and practice yoga, although not generally at the same time.
A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.
Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
Marilyn Lewis is an award-winning writer with a passion for getting readers clear, straight information that helps them stay out of financial trouble. A former reporter for The San Jose Mercury News, she works from her home in Port Townsend, Wash. Contact her at MarilynLewis@Outlook.com.
LATEST BLOG POSTS
Children from lower income families are at greater risk of suffering accidental injuries and being sickened by food, according to a Consumer Federation of America study.