Editorial Policy

Rewards Cards Don't Have to be High Maintenance

Eva Norlyk Smith Ph.D.

February 3, 2012

QHi Eva,

I&#039m 30, and I&#039ve had the same credit card since I graduated from college. It has a $3,500 limit, and I charge one big purchase (like an airplane ticket or my rent) on it a month and pay the balance off immediately online. Keeping track of finances stresses me out, and this really simple system works for me. I have a pretty good credit score, too. But I hear friends and family talking about their rewards cards and all the perks. I think it&#039s time for me to move beyond my no-frills system, but I don&#039t know where to start. What should I look for in a rewards card? Are they more trouble than they&#039re worth? And should I keep using my old card, even if I get a new one? — Maggie

ADear Maggie,

There&#039s a lot to be said for no-frills systems when it comes to managing credit cards. Far too many people end up with balances on multiple credit cards each month, and come billing time, this generally results in multiple headaches. The more charges and the more credit cards, the more to keep track of — which is one reason how card issuers cash in on millions in late-payment fees and over-limit charges every year.

So when it comes to credit cards, keeping it simple is always a good idea. Less time spent managing and paying credit card bills is more time spent living your life!

Fortunately, you can have your cake and eat it too. Like spouses, rewards credit cards come in many types, ranging from very easy-going to high maintenance — so as long as you do your homework, you can easily find a good match. To help you choose, here&#039s a guide to each category.

1. High-maintenance rewards credit cards
Without a question, the rewards credit cards in this category give the best perks and benefits — if you can stand keeping up with their high-maintenance requirements.

Most airline rewards credit cards fall into this category. These are generally cards tied to a specific airline, and, for those who accumulate enough rewards card earnings and miles to earn elite status, the doors open to some pretty significant rewards and perks. These don&#039t just include free travel, but also free checked bags, priority boarding and free upgrades to first class when seats are available. Ask Eva

On the downside, these cards are very high maintenance. It takes a real commitment to figure out all the terms and conditions, and, unless you already travel frequently, it&#039s not easy to fulfill the travel requirements to reap the best rewards. Some people like this challenge and make a hobby of cashing in on bonus sign-up offers and special deals. This works if you have extra time on your hands, but for a no-frills kind of girl like you, it probably won&#039t be a match made in heaven.

2. Middle-of-the-road rewards cards
When looking for a rewards card that is simple to manage, cash back credit cards are often a good choice, because you earn a simple cash back discount on all charges. Some cash back cards advertise 5 percent cash back on charges, which, at first glance, may sound like a pretty attractive option — particularly since these cards often come with flashy sign-up offers.

However, as always, the devil is in the details. The 5 percent cash back is rewarded in rotating categories, which often change every few months, and you have to sign up for those categories online to qualify. Many cards do offer rewards on purchases outside these categories (often 1 percent cash back). Yet, for some cards, you won't be able to earn that 1 percent until you reach a certain spending level. Of course, that little fact is buried deep in the fine print, where it is easily overlooked.

So again, to reap the full benefits of this type of rewards card, there may be more maintenance involved than you would fancy.

3. Low-maintenance rewards credit cards.
So, what is a no-frills person to do? Well, there are indeed rewards cards that will let you earn rewards on purchases without any extra work. Examples of these include the American Express Blue Cash Everyday card and the Capital One No Hassle Rewards cards. With both of these, you&#039ll automatically earn up to 3 percent cash back on grocery and gas purchases and 1 percent on all other purchases. There is no spending minimum, no enrollment needed and no rotating categories. Further, rewards earnings are easy to redeem — you can simply get a statement credit for the amount earned.

Also check out the Capital One VentureOne Card, which is one of the few low-maintenance travel rewards cards. Cardholders earn 1.25 points with no annual fee on the VentureOne card and 2 points per dollar spent on the Venture Rewards Credit Card, which comes with a $59 annual fee. Be careful, however. While the Venture rewards earnings are redeemed at a value of two cents per dollar spent when redeeming for travel-related purchases, the value is only one cent per dollar spent if redeeming for cash back.

The bottom line
In short, as long as you look around to find the right match, you can indeed get a low-maintenance rewards credit card. For the sake of your credit score, keep the other card open and just use that card once in a while. Having more than one credit card and access to a higher credit line will likely boost your credit score. If you want to show active use on your old credit card, you can always charge one of your fixed monthly expenses to it and set it up for automatic monthly payments, so you don&#039t have to spend time paying bills.

One last point of caution: While keeping it simple is a smart strategy when it comes to managing credit cards, you don&#039t want to keep it so simple that you undermine your credit score. You mention that you only charge a few things each month and pay off the balance right away. However, while charging regularly and paying off in full is great for your score, paying off the balance immediately is not.

Most card issuers only report to credit rating agencies once a month (after the bill goes out in most cases). If you pay off the balance before you get your bill, chances are that your credit report doesn&#039t accurately reflect your credit use, because the balance will show zero when reported. So wait until you receive the bill, and then pay off the balance — it&#039s a small, no-frills kind of adjustment, but it could boost your credit score considerably.