Credit Cards With Rewards Are Worth a Look

If it seems like you are getting a lot of credit card solicitations, you are. Credit card companies sent out about six billion letters in the last year.

But if you opened any, you may have noticed a dwindling number of zero-percent balance-transfer offers and more pitches for cash-back reward cards. Half of them are for reward cards.

It is the hottest segment of the credit card industry. Two-thirds of all cardholders have a reward card in their wallets. That is up from about half of all cardholders in 2002. Since then, the number of households using a cash-back card has grown 38 percent, to 32.6 million.

It's time to look this gift horse in the mouth.

Why would credit card companies pay consumers to use their cards? Discover, the industry leader in cash-back reward cards, said it gave away $500 million in 2005.

This is, after all, an industry better known for tactics like offering low-interest teaser rates that shoot up or changing the terms of a contract at a whim. Therefore, it may come as a bit of a surprise that many of the offers are credible as well as lucrative for the consumer. Indeed, cash-reward cards may be one of the most consumer-friendly products the industry has ever marketed.

It is not because the credit card companies have had a change of heart; it is because the dynamics of the industry are changing. MasterCard and Visa card issuers make their money when customers do not pay off their monthly balances; 70 percent of their revenue comes from finance charges.

Discover, which created the cash-back category in 1986, found that if it handed over a little cash to customers, they used the card more. "Loyalty means usage, and that's where we make the money," said Julie Loeger, vice president for marketing of rewards at Discover, a unit of Morgan Stanley.

American Express, which derives 62 percent of its revenue from fees paid by merchants, took notice. Several years ago it issued the Blue Cash card and then began aiming cash-reward cards at specific demographic groups. The In:NYC card, for example, is meant to appeal to New York hipsters by offering "experiential" rewards like a dinner at Tao or V.I.P. access to concerts at Irving Plaza. Citibank, one of the nation's largest card issuers, followed a similar strategy...

http://www.nytimes.com/2005/12/31/bu...y/31money.html

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FWIW, I'm pretty much a straight FF miles/points kinda' guy and I have an Amex Platinum with MR as well.

Anyone using any of these others and really liking it? Is there a best one perhaps?

Thanks!

Mark