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How to pick the right credit card

Goldberg: Rewards programs not always best pick for shoppers

Most online shoppers pay with a credit card. But how many cyber shoppers work that card to their advantage? These days, credit-card companies come with all sorts of rewards, from redeemable points to cash-back programs. Savvy shoppers will choose a card that best suits their lifestyle to achieve a specific goal, whether its miles toward a family vacation or the smaller, more frequent rewards from a specific retailer.

But credit-card shoppers beware: Credit-card companies use reward programs to lure shoppers into racking up large bills, which they will pay off slowly at a high interest rate. Most credit cards with reward programs have higher interest rates than credit cards without rewards, and the interest simply “eats up the rewards,” says Bill Hardekopf, chief executive officer of, a Web site that rates major credit cards.

Consumers who don’t pay off their bills each month in full shouldn’t even think about reward programs and simply look for a low-interest credit card, says Hardekopf. That is, this type of consumer ends up paying more in interest than they gain in rewards.

At the other end of the spectrum are shoppers, who pay off their credit-card bills in full each month. Some even use credit cards to build up rewards. If it’s more than $5, they charge it. Reward programs work best for these super-disciplined shoppers.

Credit-card reward programs have evolved way beyond frequent flier plans. Many credit-card companies now have cash-back programs, such as, where a percent of the total amount charged is refunded to the customer. These cash-back plans require some patience because the yield tends to be low, hovering around 1 percent. But the reward is cold cash, which the consumer can spend in any way they want. Many plans require customers to reach a certain hurdle before they receive a rebate. Other companies only refund consumers at the end of a fiscal year.

Consumers now can opt for credit cards that accumulate dollars or points toward several small rewards or one large purchase. At, American Express cardholders can choose from hundreds of rewards using the online search engine. Rewards are divided into point ranges or categories, from air fares to work life. A thousand points “buys” a $10 Toys R Us gift card. A Carnival Caribbean cruise is available starting at 155,000 points.

GM now offers the, which earns points towards the purchase of a new GM vehicle. Every purchase made on the card yields a 5 percent return. But remember, these cards can limit you down the road. Now that you’ve painstaking built up rewards for a GM car, do you prefer a Toyota? Oh, what a feeling!

Elusive magic in Disney program
And what about those dream dollars advertised on television? Walt Disney Co.,, recently introduced the Bank One Visa card, which yields Disney Dream Reward Dollars. The rewards are not as magical as those TV commercials imply — just buy some groceries and you, too, can take a family vacation to Disneyland.

Cardholders accumulate a minimum of 1 percent on each purchase or the equivalent of about $20 on $2,000. So it takes a lot of dream dollars to land a trip to Disneyland. And consumers can only redeem their Disney dollars once they have a $20 credit.

Bank One Visa cardholders, however, will receive some special Disney promotions in the mail, says Dinah Keefe, a vice president at the Walt Disney Co.

Of course, many cyber retailers now have reward programs. For die-hard fans of a particular store, it may pay to have that store’s credit card. Most retailers reward customers with a credit toward a future purchase. Frequent shoppers at certainly benefit from the company’s 10 percent back program—spend $100, save $10; spend $200, save $20; and so on.

Low-end stores tend to have low reward thresholds. High-end stores have high hurdles. For example, cardholders at receive a $5 credit when they buy $100 worth of goods. customers receive a $10 credit when they charge a total of $250. And cardholders receive $15 when they spend $350.

Specialty shops even have reward programs now. In addition to points,’s Visa cardholders are eligible for free shipping in the United States and free monograms on select products. cardholders earn 1-5 percent back on their purchases. A portion of the sales also helps support conservation projects.

Most credit-card companies and retailers make it easy to apply online. Just remember: The bill still has to be paid when it arrives. And with any credit card, make sure to read the fine print. Special restrictions often apply.

Teri Goldberg is’s shopping writer. Write to her at