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Consumer News

Credit Card Incentives

Credit card companies will offer incentives so that people will want to get their card. Some of these incentives are:

  1. Rebates (money back) on the purchases you make
    • Frequent flier miles or phone-call minutes
  2. Additional warranty coverage for the items you purchase
    • Car rental insurance
    • Points toward car purchase
  3. Travel accident insurance or travel-related discounts
  4. Credit card registration, to help if your wallet or purse is lost or stolen and you need to report that all your credit cards are missing

In addition credit card companies may offer insurance to cover payments on credit card balances if you become disabled, injured, unemployed, or die. Premiums are a percentage of the amount owed on the card and are not necessarily a good deal. You may also get insurance to cover the first $50 of charges if your card is lost or stolen. Under federal law, you are not responsible for charges over $50.

Make sure you study these offers carefully to decide if they are right for you. Don’t pay for something you don’t want or don’t need.

Are Rebate Cards a Good Deal?

These offers can be a great thing or a very bad idea depending, in part, on your spending habits.

The best way to use rebate and incentive cards are to pay off your balance every month. Get a card that has offers which will work for you and make sure they are making solid offers not pie in the sky. Air miles are a good example. These can be useful but some cards and airlines make them impossible to use. So read the fine print on all offers before accepting one.

If you don’t pay your bill off monthly, consider whether the "incentive" could actually be obtained at less cost for cash. For example, Smart Money reports that if you charge $8,500 a year on a credit card carrying an average balance of $1,500, you would earn enough frequent-flier miles to get a free domestic ticket in three years. But you would also be paying $265 in interest each year (17.65% APR), plus a total of $150 in annual fees. That means the "free" ticket would end up costing $945. For the same money, a consumer may be able to buy three round-trip tickets from New York to Los Angeles!

Remember the card companies are in business and their business is, money, so no matter how it looks on the surface they will not be giving it away for free. Don’t spend money to save money. Only take incentives or rebates that you will use and pay your card off every month.

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