Charging for Rewards, or Rewards for Charging?

We keep running into references to the Frugal Travel Guy who uses loyalty rewards programs, such as credit card rewards to finance his worldly travels. While he shares some good ideas, make no mistake using rewards programs at the level he does is not without effort. Frugal Travel Guy spends a great deal of time researching his methods.  We’re not knocking him at all, in fact, we give him credit–err, uh rather we should say props for what he does. Just know that many of the rewards programs he uses are from credit cards and credit as we all know (Frugal Travel Guy included) is not something to mess around with.

So before you jump in and start applying for credit cards that offer big reward programs–and there are many right now as card companies compete for your business–be sure to consider the following:

Your goal should always be to build a strong credit rating. Understand that every time you fill out a credit card application, you ding your score. It may be a small ding, but each ding makes the dent bigger.

You should n0t sign up for a card just because it has nice points. You’ve got to read the fine print and consider the annual fees. For example, many cards will offer a portion of the reward points just for signing up, but not release the remainder of the promotional points until you’ve reached a minimum charge on the card.

Is the annual fee worth it? It’s not uncommon for higher end cards to charge over $450 in an annual fee. So, do the math and figure out if the rewards you get are greater than the fee charged. How many points are needed to redeem an airline ticket, for example? Are there other free services included and would you use them? Some cards offer concierge services or tee-time booking. Is that of value to you?

Some people think that they can sign up for a new account rewards just to collect the points and then cancel the card. Nope. Many card companies require a minimum period in which you must have and use the credit card. Also, canceling credit cards can hurt what’s known as your credit utilization–how much credit you have compared to how much you owe. For example, if you owe $2,500 on three credit cards with a total credit limit of $10,000, your utilization is 25 percent.

If you are young and just beginning to build credit, you should be especially cautious about chasing cards for reward points. On the other hand, if you are mature and have a strong healthy credit history going after a card for its points probably won’t hurt you.

We can’t stress enough how important it is to read the fine print of every credit card offer. Also read the fine print on rewards offers.

The Coors Credit Union Visa Rewards card comes with ScoreCard Rewards and offers great rewards on merchandise, electronics, home products, personal care, recreation and travel.

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