Most rewarding rewards cards

May 3, 2010 8:32:26 PM PDT
There are a lot of new reward credit cards out there that promise you cash back, points, or air miles. Sorting through the offers can be confusing. But Consumer Reports Money Adviser has sized up the "best rewards cards" and says be aware, they're only worth it if you pay off your balance in full each month. That's because reward cards generally have higher interest rates. So if you carry a balance, you could end up paying more in interest than you get back in rewards. And watch out for hidden fees! In a recent Consumer Reports survey, 19 percent of rewards cardholders said they had increased fees for services such as balance transfers, cash advances, and foreign transactions in the past year. And scrutinize the fine print.

Some cards have clauses that can make you lose out on points or cash back. Take the Discover card. It gives 1 percent cash back, but that drops down to 0.25 percent at warehouse or discount stores such as Walmart.

The Chase Freedom card can be good because it offers 5 percent cash back in certain seasonal categories. But because those categories change every quarter, you have to opt in every time, which can be a hassle.

Consumer Reports Money Adviser says one of the best cash-back reward cards is the American Express Blue Cash. It doesn't charge an annual fee, and after spending $6,500 within a year, it offers 5 percent cash back at supermarkets, drugstores, and gas stations, and 1.25 percent elsewhere.

Retailers are offering rewards cards, too, and if you're a loyal customer, they can pay off. Consumer Reports says a good one is the Rewards Visa card. It has no annual fee, pays $30 back on your first purchase, and points are unlimited and never expire.

Because terms and conditions of rewards cards change frequently, be sure to routinely check for updated terms.

Consumer Reports has no commercial relationship with any advertiser or sponsor appearing on this Web site.