FEDERAL DEPOSIT INSURANCE CORPORATION 

March 25, 2019 

consumer news 

Rewards Cards: Minimize the Pitfalls, 

Maximize the Benefts 

PHOTO: GETTY IMAGES

Knowledge of card 

programs provides 

the best rewards 

a defned period of time. 

Wondering how to get cash back or 

free airline tickets by using a debit or 

credit card? With the variety of card 

rewards programs on the market and the 

restrictions that may accompany them, 

it’s important to know the details and 

choose the card that’s right for you. 

What Are Rewards? 

Rewards are incentives to use a debit 

or credit card to make purchases. 

Card rewards programs share several 

key characteristics: 

• Rewards typically have units of value 

such as cash, miles, or points. 

• Rewards can be accumulated over 

time and are subject to diferent terms 

and conditions. 

• Rewards are ofen based on a percentage 

of your spending and can vary by what 

is spent in different categories. For 

example, you might get 5 percent back 

on gas purchases with your card. Tere 

may also be a lump-sum rewards bonus 

Card rewards can take a variety of forms, 

but most fall within these major categories: 

• Cashback, which you can redeem for 

a statement credit or a cash payment. 

• Points, which you can use to purchase 

goods and services, including travel, 

gift cards, and discounts or rebates 

on goods or services, or convert to 

a cashback reward. 

• Co-branded card rewards, in which 

a card issuer partners with a business, 

such as a retailer or airline, to allow 

you to earn rewards in the business’s 

rewards program. 

How Do Rewards Work? 

Earning 

Earning rewards is generally determined 

by your spending volume. In some cases, 

you earn a fxed quantity of miles, points, 

or cash in proportion to the amount 

you charge to the card, like one point per 

dollar spent. In other cases, you earn 

according to different conditions, like 

making purchases at a particular merchant. 

Te other major form of earning is the signup bonus, which is meant to encourage 

you to both sign up for the card and use 

it right away. Sign-up bonuses give you a 

substantial lump of additional rewards, but 

to receive the bonus, you must purchase 

a certain amount with your card within a 

specifc time period, usually no more than 

a few months. 

Redemption 

Once you have accumulated your rewards, 

you will want to exchange them for the 

best value. Rewards programs are generally 

categorized by diferent types of goods and 

services available. In some cashback and 

co-brand rewards programs, redemption 

can occur automatically when you have 

accumulated a preset number of points.

for spending a certain amount within 
More commonly, however, you must take 

action to redeem points and generally have 

to earn a minimum amount before you can 

use them. 

Expiration and Forfeiture 

All rewards not redeemed are potentially 

subject to expiration and forfeiture. Some 

cards have policies where if your card is 

inactive for a long period of time, your 

rewards may expire. You may also forfeit 

your rewards if they are not used by a 

specifc deadline. Tough these two terms 

are distinct, expiration and forfeiture both 

result in the same outcome: your inability 

to use the rewards if you don’t follow the 

conditions provided by the issuer. If you’re 

having trouble fnding your card rewards 

expiration and forfeiture rules, contact the 

card issuer directly to ask. 

Finding the Best Rewards Card for You 

While the specifc rewards ofered and the 

rules for earning and using them are an 

important part of deciding which rewards 

card to apply for, you should also consider 

the following to fnd the best card for you: 

Annual Percentage Rate (APR) 

Te APR is the amount of interest you will 

pay annually for borrowing money using 

your credit card. Of course, you’ll want to 

fnd a card with a low APR, and you’ll fnd 

many cards advertising low introductory 

APRs, which will eventually increase. You 

won’t know the rate you’ll get until after 

you’re approved, but before committing 

to a card, make sure you’re comfortable 

that the APR charged is worth the rewards 

ofered. For instance, you may fnd a card 

that ofers 2% cash back on purchases, but 

if you do not pay your card balance in full 

each month and end up paying 15% on 

the balance that is carried over to the next 

month, you’ll be paying more in interest 

than what you are earning in rewards. 

APR for Balance Transfers 

Most cards have a different APR for 

balance transfers. Ofen, cards ofer a low 

introductory rate for balance transfers 

that will increase at some point. If you’re 

thinking about transferring a balance from 

one card to a new rewards card, compare 

the interest rate you are paying now with 

the rate you’ll pay with the new card (not 

just the introductory rate). 

Fees 

Compare the fees listed on each card you 

are considering. Common fees include 

an annual fee, cash advance fee, and 

late-payment fee. If you’ll be transferring 

a balance, take a close look at balancetransfer fees too. You will want to think 

about whether the amount you will pay 

in fees is worth the amount of rewards 

you will earn. 

There are lots of details to consider, so 

before you sign up for a rewards program, 

make sure it is the right choice for you to 

get the most from your spending. 

For more help or information, go to www.fdic.gov or 

call the FDIC toll-free at 1-877-ASK-FDIC (1-877-275-3342). 

Please send your story ideas or c omments to Consumer Affairs 

at consumeraffairsmailbox@fdic.gov