How to Decipher Credit Card Advertising

By Lynn Truong. Last updated 19 March 2015. 5 comments

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There are hundreds of credit cards available with all sorts of different terms and rewards. Wading through them to figure out which one to sign up for can be a complicated and frustrating process. One card might seem to offer a large cash back percentage, but look at the fine print and there's a dollar limit where if you exceed it, the cash back percentage drops significantly. Others will offer a tempting sign up bonus, but you have to pay a hefty annual fee. (See also: Best Credit Cards With No Annual Fees)

If you need help sorting out the marketing from reality, here's a quick primor on what to look for when you're reviewing those credit card offers.

Rewards

This is the main reason you'd want a credit card. It just doesn't make sense to be using a credit card that you're not getting rewards on (except, of course, if you carry a balance, in which case, no amount of rewards would make up for the interest you're racking up). Rewards generally come in the form of cash back, miles towards travel, or points for other types of redemption (for example, merchandise or gift cards). The baseline rate on most credit cards for rewards is 1% cash back or 1 mile/point per dollar spent. The difference between rewards cards will show up in the ways you can get "bonus" points. For example, one card might offer 5% cash back on groceries. Another might offer 2 miles for airfare purchases. One way to choose a credit card is to find the one that offers bonus rewards for the category you already spend the most on. For frequent flyers, that would probably be airfare. For families, that might be groceries. (See also: Best Credit Cards for Dining Out)

Earning Caps

This is one of those things usually in the fine print. Cash back credit cards usually have a cap on the amount of cash back you can earn in the bonus categories. Rewards credit cards that offer points and miles don't have earning caps as often, but some may, so always check! You may not be getting what you expect if you spend a lot in the bonus categories. In some cases, it might make sense for you to choose a card that offers a lower bonus, but without earning caps. You'll have to do the math.

Redemption Requirements

You might be really excited about cashing out the first $20 you've earned in cash rewards, only to find that the minimum redemption amount is $35. Depending on what you plan to use the rewards for, and when you need them, you want to make sure to choose the card with the redemption requirements that suit your needs. 

What type of credit card are you interested in?
How much do you spend per month?
Do you carry a balance?

Redemption Options

Cash back rewards are pretty straightforward. You usually either opt for a statement credit or a check/direct deposit. However, when it comes to the world of miles and points, redeeming can be extremely difficult. You might have chosen a travel rewards card because you want to get a big discount on your yearly overseas trip. But you might find that the miles you've racked up don't transfer to the airline you want, or doesn't offer award seats for the country you want to fly to. Know what you're going to be using those points or miles for, before you get stuck with a ton of them you can't even use. (See also: Which Airline Loyalty Program Has the Best Value for Their Miles?)

Annual Fee

The credit cards that offer big bonuses on popular categories are usually the ones with the annual fee. Bigger benefits usually come with a higher price tag. Now don't write off a credit card just because of its annual fee. Lots of people have credit cards with annual fees and they get more than enough rewards to pay for that fee. It depends on your spending habits, and whether you are going to take advantage of those extra benefits. Again, do the math.

Foreign Transaction Fee

This is something to be aware of if you use your card internationally. Many cards will charge a 3% foreign transaction fee to your purchases. If you travel a lot, you should consider a card that has a low or zero foreign transaction fee.

Benefits

Beyond points, miles, and cash, a credit card can offer many benefits. For travelers, perks like lounge access and priority boarding is invaluable. For shoppers, purchase and price protection can save a bundle. Don't just stop at the bonus categories and sign up offers. Check out the entire list of benefits a credit card has to offer. (See also: 13 Awesome Credit Card Perks You Didn't Know About)

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any bank, card issuer, airline or hotel chain.

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Guest's picture

Very useful insight into this. I came across your post via Twitter. We need more articles like yours to protect consumers better. Thank you!

Guest's picture
Juggler314

I have a Household bank visa that gives me a straight 2% back on all purchases up to $400/year (so on the first 20K of rewards). It also has a $39 annual fee. I have yet to not max this out so I'm netting $361/year in free cash. I could probably do slightly better by using other cards and chasing catagories...but it's just not worth it. I use this card and only this card most of the year (I don't charge much more than 20K/year on cards).

Guest's picture
Karla

I've had my Discovercard for several years. I use it for almost everything (groceries, gas, utility payments...) and I pay off the balance every month. Every quarter, I sign up for the 5% deal (it changes every quarter). The rest of the time, I get 1% back. At the end of the year, I look at my year-end statement online. Each year, I earn from $250-$500 in cash back, which I usually apply to my balance. A few times, I've used my CashBack balance to buy jewelry at Ultradiamonds, and get 2 times my CashBack amount. (e.g., I had $40 in cash back which equaled $80 for a very nice pair of ear rings!) How much cash back did you get on your credit card or debit card or cash expenditures? Even if it's "only" $200, it's $200 more than I'd have had otherwise. Of course, this ONLY works if you pay off the balance every month. If you carry a balance and pay only the minimum, then you need to cut up your cards immediately. If you only charge a few hundred dollars each month, 1% isn't much. But if you STOP using your debit card/cash and ONLY use the checking account to pay off your Discovercard each month, you are cash ahead. e.g., if you spend $3000 per month for gas, groceries, utilities, lunch, whatever, 1% of that is $30 more than what you'd have had if you'd paid cash! (Self control is very important, of course.)

Guest's picture

Great article! It's smart to look at the real deal and not to be fooled by slick advertising. Bonus offers are great, but don't forget to look for the best base rate and to factor in any annual fees you might pay before signing up. Also know that branch banks can't afford to give the best deals since US banks spend $80 billion every single year just building and maintaining their branches. Check out online banks as they can afford to give you the most in value.

Guest's picture
WD678

I use Discover only for the 5% purchases. You only have to sign up one time per quarter, use the Discover on the special categories, only if you need them, and collect your cash. Occasionally, I buy something that is not in the category, thinking it is, or just forget and buy something in the category on another card which pays 2% back. No big deal. Over a few years, I've got a few hundred dollars, so good deal for me.

I wonder how Discover makes money doing this. Perhaps they are banking on us using the card for everything? Or they have deals going with these categories of merchants?