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3 Signs Your Rewards Credit Card Is a Waste of Money

By U.S. News & World Report

Rewards credit cards have fast become a popular form of plastic, making up nearly 80 percent of new card accounts in the first quarter of 2014, according to the American Bankers Association. However, your favorite card may be costing you more than it’s worth, according to an August survey by NerdWallet. Here are three signs that your rewards credit card is unrewarding.

1. You don’t spend enough to cover the annual fee.

About half of consumers don’t want to pay credit card annual fees, but the NerdWallet survey of over 2,000 adults found 31 percent of consumers who own rewards credit cards don’t even know what they cost.

As of June, the average annual fee for a rewards credit card was $58, and the average rewards point was worth 1.14 cents. You’d have to spend $5,088 annually — more than $400 a month — to offset the fee before your rewards truly become your own. You’d also have to account for opportunity cost of the rewards you could have been racking up on a card without an annual fee.

On the flip side, cards with annual fees often come with higher rewards and better perks, such as travel credits, upgraded purchase protection benefits and supersized sign-up bonuses. Whether you opt for a card with an annual fee should depend on your personal spending habits and how you’d use the card’s benefits.

Take back your money: If you don’t spend enough on your credit card to pay for the annual fee, you’re better off applying for a no annual fee card. This doesn’t mean your new card will have paltry rewards. Many no annual fee cards offer cash back or travel rewards equal to 1 percent to 2 percent on each purchase.

When evaluating no annual fee cards, pay attention to the perks — or lack thereof. A few popular benefits that you may find with no-fee cards include protection benefits on purchases, rewards redemption options and no foreign transaction fees.

2. You don’t redeem rewards.

Rewards are clearly important to consumers — over half of those who switched credit cards in 2015 chose their new card based on a better rewards program, according to J.D. Power’s U.S. Credit Card Satisfaction Study. But some cardholders aren’t using these rewards.

The NerdWallet survey found nearly 1 in 5 consumers with rewards credit cards didn’t redeem any of their rewards points last year. While there are legitimate reasons to hang on to travel rewards, such as reaching elite status or saving up for a big trip, not redeeming rewards also comes with risks.

One major risk is devaluation. Mile devaluation has become common in airline frequent flier programs. If your favorite rewards card racks up miles and you aren’t using them, the value of your miles may decrease before you get around to booking your trip. This means it will take more miles, and therefore, more time, to earn a free flight.

Another risk is expiration. Nothing lasts forever, and that includes most credit card rewards. With a few exceptions, rewards expire after a certain period of time, which just wastes cash back, miles or points.

Take back your money: If you haven’t evaluated your rewards for a while, take a look at what you’ve earned. Redeem any cash back and decide how you want to use points or miles, now or in the future. Don’t let your rewards go to waste — they’re one of the best features of credit cards.

3. You’re spending on multiple cards.

If it takes $5,088 to break even on one typical rewards credit card with an annual fee; it takes double or triple that to break even on multiple rewards cards. The average consumer has two rewards credit cards, according to the Federal Reserve Bank of Boston. Assuming they all have annual fees, you’d have to spend more than $10,000 a year just to break even. Only then would you begin racking up rewards on your purchases.

Take back your money: Multiple cards can come in handy, especially if they offer different benefits. But if you don’t spend a lot each year, several cards with annual fees will cost you more than they’re worth. Limit yourself to one or two rewards cards with an annual fee. For additional cards, opt for no annual fee cards with high rewards rates.

The Bottom Line

A good rewards credit card should earn money, not cost you. To ensure that you’re taking full advantage of your favorite cards, make sure you spend enough to offset the annual fee, redeem your rewards regularly and limit the number of cards with annual fees.

More from U.S. News

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3 Signs Your Rewards Credit Card Is a Waste of Money originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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