Loyalty Program Credit Cards Have Pitfalls

Plastic from these programs usually comes with higher interest rates.
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Retailers' loyalty cards are usually not worth the effort of signing up, and those that include a credit-card offer generally have higher interest rates than typical cards, according to findings from a consumer survey.

A Consumer Reports poll shows that about 85% of households participate in at least one loyalty program, and 53% belong to at least three. Retailers have been

pushing such programs

to get customers to keep coming back and spending more.

However, retailers have made the rules for rewards "increasingly complex" with additional restrictions and limits on how much consumers can earn. Programs that offer credit cards tend to have higher annual percentage rates, going as high as 19.99%, and possibly even higher.

"If the rates are high, the cost to carry a balance will often erase any savings the rewards program may offer," says Amanda Walker, Consumer Reports senior project editor. She adds that "carrying the right cards and ignoring the rest can save you a little money ... but consumers must choose programs that compliment their spending habits."

The publication, which is put together by the nonprofit Consumers Union, suggests that customers favor cash-back cards but skip credit cards if they carry a balance. Use airline miles as quickly as possible, since cashing in frequent-flyer rewards has become more difficult. Consumer Reports also warns that consumers should beware of overspending just to "earn a new digital camera or set of golf clubs."

A simple solution is to do the math: Figure out how many points are needed to earn the prize and how much must be spent to get it. If the rewards aren't worth the costs, skip the card.

Credit card rates and more can be found at