Quick Tips
Not *That* Great: 3 Rewards Credit Card Tricks to Watch Out For
I write a lot about credit cards. That not only includes reviewing the ones I have but also discussing new cards and my thoughts on whether they’re worth it. In doing this, I’ve now come across a few recurring themes that I think highlight how some credit card marketing can oversell what you’re actually getting. So, for my quick tip today, I want to highlight three tricks (and one bonus) that card companies use to entice you into something that isn’t as great as it sounds.
“Up to” X%
Truth be told, I’m penning this post right after writing about an upcoming Bitcoin rewards card from Coinbase. According to the press release for that card, it offers “up to 4%” back on every purchase. That sounds amazing! Except that “up to” carries a lot of variables with it.
In the case of this Coinbase One card, we don’t yet know exactly how to customers can earn that 4% rate, but we know most will earn just 2%. But this isn’t the only card product with a variable rate. So, when you see the “up to” language in a card offer, dive deeper so you know exactly what it takes to actually earn that.
Spending Caps
Another common tactic card companies use to make their offer sound richer while preventing them from going broke is spending caps. Take, for example, the likes of the Discover It or Chase Freedom Flex cards, which offer 5% back on bonus quarterly categories. Again, this sounds incredible, but that 5% is limited to just $1,500 in combined bonus category spending per quarter. In other words, you won’t be able to earn more than $75 in cashback per quarter with this bonus (you’ll still earn the regular 1% back after hitting the cap, though).
Granted, some caps are more generous than others — such as the Amex Gold capping its 4x at $25,000 per year at U.S. Supermarkets and $50,000 per year at Restaurants. Nevertheless, this is another piece of fine print you’ll need to read.
Credits with Restrictions
Speaking of American Express, in recent years, the company has been criticized for turning its premium credit cards into “coupon books.” While that may sound like a strange strategy, it does allow them to advertise that the Amex Platinum offers $1,400 in credits for just a $695 annual fee. Not only is it unlikely that all of these credits will appeal to every person but some have odd restrictions that make them difficult to use at all.
To be fair, I actually do think that most of the Platinum card’s credits are relatively easy to use (even the maligned Airline Incidentals credit). I say “relatively” because I’ve seen worse. For example, just this week, Citizens launched a new card called the Citizens Summit Reserve. Looking at the site for the card, the $120 in annual statement credits for travel purchases and $10 per month statement credit for Lyft sounds great. Alas, upon further inspection, that $120 travel credit is broken into $10 per month increments — and, even worse, Lyft credit requires you to spend $25 per month to earn the $10 off. That’s not great!
By the way, these credits are already tricky as they make you think that you’re saving money and making up for the annual fee. Although that may be true if you’re getting a credit for something you’d buy normally, it’s far more likely that you’ll end up spending these credits just to use them. In these cases, you’re not really getting the value you think you are. Pretty tricky, huh?
Bonus: Hotel Cards Overstating the Earning Rate
Lastly, a quick pet peeve I have seems to be specific to hotel cards. Oftentimes, these cards earn great multipliers on purchases made at the brand’s properties. However, it’s common to see the stated earning rate bundle in the bonus points earned from the card itself with those you’d earn just for being a member of the loyalty program or having status. To be fair, some issuers do a great job at breaking this out and “showing their work”… but others don’t. In my opinion, those who don’t should really take a long look in the mirror and strive to do better.
In spite of these sometimes annoying tricks, I do still love my credit cards. And, to be clear, I don’t think that cards that employ these tactics are inherently bad. Instead, let this serve as a reminder to do your research and make sure you completely understand the rewards credit card offerings before submitting your application.
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