Knowing and Understanding Your Rewards Programs
Student credit cards that provide rewards ranging from frequent flier miles to cash can offer some rich benefits to those who may hold them. However, using the wrong reward card or not totally understanding all of the conditions can end up costing more than it gives. Reward student credit cards can have all kinds of pitfalls, from complicated restrictions listed only in fine print to frequent flyer miles that expire before you have an opportunity to use them.
I have listed six of the most common elements of reward student credit cards that can be unrewarding to many cardholders:
1. Annual fees
Only about 20 percent of reward student credit cards carry annual fees, and they should generally be avoided. Anything over $50 or at most $100 is excessively high and should be avoided on any credit card.
2. Frequent flier constraints
The problem with frequent flier student credit cards is the issue of award availability. It is often difficult to find seats on flights for which you want to redeem your miles. Because you are buying your ticket on the open market, there is not capacity controls in place for those trying to redeem miles directly.
3. Difficult thresholds
Some student credit cards require you to spend a lot of money before the rewards become appealing. For example, a specific credit card offers holders 5 percent cash back on general everyday purchases at supermarkets, gas stations and drug stores and a 1.5 percent rebate on all other purchases.
However, these benefits will not kick in until you have charged $6,500 on the card. Until this point, you only receive 1 percent cash back for your spending at supermarkets, gas stations and drug stores, and only 0.5 percent on all other buy’s.
4. Slow and complicated payment
Some cards will send you rewards like a $50 check, as soon as you have earn them, but others will make you wait. Then, there are other student credit cards that will not give you any cash back until you have owned the card for 13 months.
Many rewards will have expiration dates, so you want to be vigilant about redeeming your points as quickly as possible to ensure you receive your benefits other wise you just lose it. Credit cardholders should redeem points within a month or two of receiving their card to make sure the redemption process goes smoothly.
5. Narrow bonus categories
Many cash back credit cards offer higher percentages back to you when you have used the card at specific grocery stores, gas stations or pharmacies. This will generally include proprietary stores only for those categories. For example, you will not be reimbursed for gas purchases at Wal-Mart or food purchases at Costco. Cards that at first glance make you think they will reimburse you for much of your expenses may actually not be as generous as they appear to be.
Most of the student credit cards will have specific participating retailers, and you must pay attention to what these are to redeem you bonuses.
6. Cash back limits
Many cash back student credit cards have yearly ceilings for the money you get back. Always check the fine print to see how much your reward can earn over a specified period of time. If you are going to pile up rewards higher than the amount stated, you may want to either acquire a credit card with a higher limit or open several other cards.
It is good advice have more than one student credit card so that your balance on any one of them does not exceed 30 percent to 50 percent of your credit card limit. If you do surpass those limits, your credit score can be affected.
Reward cards can pay off wonderfully for those who manage their student credit cards responsibly, but you have to do your homework to make sure you get the student credit card(s) that best suit your financial situation and your particular spending habits.
Student credit cards.com @ June 3, 2008