How “Worth It” Are Credit Card Rewards Anyway?

June 21, 2013

This summer, you’re going to be inundated with credit card rewards offers. From your TV to your computer and especially your mailbox, avoiding these offers is going to be next to impossible. But here’s the question you should ask yourself: how “worth it” are rewards anyway?

The answer is that some rewards are very worthwhile to accrue and others not so much. Essentially, the net worth of a reward varies by the issuer, the products, the experiences you can redeem rewards on and how much work it takes to accrue said rewards. Determining which rewards are “worth” pursuing is a judgment call for most consumers, while more meticulous consumers will break out the calculator and figure out the net worth of each point or mile offered before coming to a decision.

Look – I was an English major. Math is hardly my strong suit so I’ll leave the calculations to the smart guys and girls. However, I can tell you which issuers know how to make rewards worth your while.

But first a disclaimer: It’s rarely – if ever – worth overspending or tweaking your budget just to earn more credit card rewards. In most cases, we’re talking about pennies back per dollar spent. Can these rewards add up over time? Sure. But they’re hardly worth running up a balance you can’t pay back in full each month.

In short, don’t go well out of your way to accrue rewards. If you get a solid return on rewards for the purchases you plan on making anyway, that’s great. But don’t chase 2 percent cash back simply for the sake of earning, well, 2 percent cash back!

OK, now that that’s resolved, here are some ways in which credit card companies do make redeeming those organically-accrued rewards worth your while.

Discover

Discover keeps rewards simple by sticking to a basic cash back program. For example, the Discover it® Card offers 5 percent cash back on up to $1,500 in purchases made in categories that rotate each quarter and 1 percent cash back on everything else. The catch is that you have to enroll, and while I’m not a Discover member personally, I’ve been made to believe through credit card reviews online (and Discover directly) that enrolling can be as simple as responding to an email.

OK, so that cash back program is solid and simple. However, it’s Discover’s online mall that makes accruing cash back worthwhile. Members can make purchases directly through Discover, using their credit card to earn anywhere from 5 to 20 percent cash back on the purchases they make. It’s the cash back discounts that make enrolling with Discover – and making purchases through their online marketplace – worth your while.

Chase

When I start hearing about rewards points, my head starts to spin. To me, keeping track of thousands of points is an arduous task. But hey, I’m an English major, remember? So I was reluctant to even address Chase, but one detail of their Ultimate Rewards(SM) program makes considering opening a Chase account worthwhile for even the most number-phobic consumer: 20 percent off travel.

The catch with this offer is that 20 percent off is reserved for only their most lucrative (and-hard-to-get) cards, including the Chase Sapphire Preferred® Card. If you have excellent credit and you’re lucky enough to get approved, you can receive 20 percent off airfare, hotels and other travel-related expenses when you book through their Ultimate Rewards program.

American Express

Finally, there’s AmEx. Long regarded by the general public as having the “best” rewards program (though their competitors have made great strides to close the gap over the last several years), American Express makes earning points worthwhile in a number of ways. VIP entertainment packages, luxury hotel stays and high-demand merchandise are all available through their Membership Rewards program.

Again, we’re going to hold off on any serious calculations, but a quick tour of their site can tell you a lot more than I can in regards to tier points, partnered retailers and every other way in which owning an American Express card can lead to some worthwhile rewards. Similar to the above Chase card, the catch with these cards is that they’re reserved for excellent credit consumers only. They also generally require an annual fee to carry, but overall the good outweigh the bad (and then some) when it comes to AmEx.

In Conclusion…

Credit card rewards are worth signing up for and accruing so long as you don’t venture outside the limits of your budget. If you plan on paying for airfare anyway, consider using a card that will reward you back with miles or cash for your next trip. Simply accrue your rewards naturally, stay within your means, pay on time each month and you’ll be fine.