Reward cards what they mean to you

Almost every credit card company has reward programs and some have special reward cards. You name your passion, and the credit card companies probably have designed a rewards card for it.

Bank of America is having more than 5,000 partnerships worldwide, offering customers points for everything from travel to merchandise to one-on-one meetings with NASCAR drivers. Chase is advertising about the benefits of its Freedom card, which allows customers to switch between points or cash back. And newcomer Barclays touts its Direct TV Rewards Card for giving "Rewards Money Can't Buy," such as backstage passes to "The Tyra Banks Show" or a chance to meet CNBC "Mad Money" host Jim Cramer.

"We see rewards programs as an important part of our product offerings," says Ric Struthers, North America Card Services executive for Bank of America.

"Almost every offer out there has some type of rewards component," says Megan Basilio, managing director for marketing at Barclaycard US. "Consumers expect rewards for what they spend."

But are reward cards really all that rewarding?

"A lot of times the sizzle is not as good as the steak," says Bill Hardekopf, CEO of Lowcards.com, a site that compares credit card offers. "You have to be very careful and study the offers that you are considering."

One should know that the reward cards make people spend more and the companies are making their money.

"Rewards cards aren't free," says Emily Davidson, a credit card expert at Credit.com. "Credit card marketers are very, very smart. . . . They make a lot of money just by having you use the card."

A report in the Nilson Report which was published in an industry newsletter shows that rewards dramatically increase credit card use and the merchants who sign an agreement with credit card companies get a bonus, as most of the people who redeem rewards end up spending extra at the store.

One must read the fine print carefully actually the rewards aren’t as good as they look.

Some cards will offer 5 percent cash back, for example. But a closer look at the agreement could show that the 5 percent rate kicks in only after spending, say, $2,000 in a month at just 1 percent. And after spending $2,500, the rewards go back down again to 1 percent, or less.

Choose the card carefully. It should work for you means give more benefits to you. Rewards aren't very useful if they don't match your spending habits.

Finally, before even starting down the road of rewards, consumers should review some basic personal finance 101: Don't even think about a rewards card if you can't pay off the card in full every month.