Like investments, good bank card rewards programs can make wallets fatter.
But consumers should not be swayed by rewards targeted tower specific, big purchases, the FDIC says in a new consumer bulletin. Instead, the agency recommends programs that allow you to reap rewards from purchases you would normally make.
"For example, if you are planning a vacation, then a credit card offering a lot of points for airfare and hotel costs may appeal to you,” said Susan Boenau, chief of the FDIC's Consumer Affairs Section. “But if the card also has a high interest rate and you plan to carry a balance, you may find another credit card offering a lower interest rate may be a better deal overall.”
The FDIC noted that consumers could benefit from programs that target spending that is common among different age groups. For example, some credit cards allow consumers to automatically deposit cash-back rewards into a college savings account, while some have low interest rates on deposit accounts and rebates on ATM fees for senior citizens and students.
There are also pitfalls to be avoided when it comes to choosing a rewards program, the FDIC said.
One of the biggest pitfalls to avoid is fees can negate the value of the rewards with some cards, according to the FDIC.
Some credit cards deduct rewards points earned if a monthly payment is missed, the FDIC cautioned. Some programs also put an expiration date on rewards points, as with frequent flier air miles.
In addition, a rewards credit or debit card may require customers to spend a certain amount to gain and retain rewards.
The agency also advised not signing up for too many rewards cards since that could make it difficult to accumulate enough purchases on a single card to become eligible for the rewards.