Feb. 3, 2010— -- More than 173 million Americans had credit cards in 2006, and that number is expected to increase to 181 million this year, according to the U.S. Census Bureau.
With the increasingly difficult economy, people are using their credit cards more and more, and studies have shown that most people participate in a credit card rewards program. Those programs may carry rewards for airline miles, cash back, retail discounts, shopping points or variety of other benefits.
Hobson said consumers should make sure their cards' rewards are easily redeemed, and they should pick a card with a program whose rewards will suit them.
She also advised that consumers get only one reward card -- and only if that consumer is a disciplined shopper and pays off his or her balance on time. According to credit.com, having a rewards program attached to a credit card doubles the amount of spending on that card.
Hobson also said rewards cards are usually reserved for people with good to excellent credit, and interest rates are usually higher for rewards cards that for regular cards. According to creditcards.com, this week the average national credit card annual percentage rate of interest is 13.17 percent, compared with 13.47 percent for a rewards card and 14.17 percent for an airline miles card.
Hobson gave her top picks for rewards cards, in the following categories:
Hobson's Pick for Overall Rewards Card
Hobson loves the card because it's a charge card -- which means the balance must be paid off in full every month, preventing consumers from getting debt way beyond their ability to pay. Consumers who are late on their payments may be assessed a late fee ranging from $35 or 2.99 percent of their total balance, whichever is greater. The late payment fee varies from state to state.
The one downside of the card is that it carries a $95 annual fee, she added.
Top Air Mileage, Cash-Back Picks
The card also has a good membership rewards program. Members can earn one point for every dollar they spend, double points for travel booked through American Express Travel and triple points at more than 200 retailers at bonuspointsmall.com
Cardholders may also transfer points to 20 different frequent flyer programs, get extended warranties and travel protection, and use points to make donations to good causes, such as Haiti earthquake relief. Many other credit cards may also be used to make donations to charity.
Hobson's Pick for Airline Mileage Rewards Card
Cardholders get one mile for every dollar that is spent, and earn double miles for certain travel and restaurant purchases, up to $3,000.
Hobson also recommended the Capital One Visa No Hassles Miles reward Visa card. The APR is 13.9 percent, there is no annual fee and no blackout dates, there is no limit to how many miles may be earned per year and the miles accrued may be redeemed on any airline.
The holders of this particular Capital One card also earn one mile for each dollar of up to the first $1,000 spent each month, and earn two miles for every dollar spent beyond the first $1,000 a month.
Both this card and the Discover card may be used to donate to charity.
Hobson's Pick for Cash-Back Card
Hobson calls it one of the best cash-back cards. It has no annual fee and the APR starts at 11.99 percent. Consumers who spend more than $3,000 in a year will earn 1 percent of that back, but could earn 5 percent back if they spend money for certain types of purchases, such as for travel, restaurants and home.
Consumers may also donate their cash reward to a select number of charities.
Hobson Pick for Retail Points Card
The card has no annual fee and the variable APR starts at 12.24 percent.
There are numerous options for consumer rewards. Shoppers will earn one point for every dollar spent, plus 10,000 bonus points after the first purchase. Consumers may earn unlimited points that do not expire.
There is a rewards mall where cardholders may spend their points, and points may also be used as credit -- money back -- against purchases.
Redemption of points is easy, and the card may be used to make charitable donations, Hobson also noted.
Hobson's Pick for Retail Rewards Card
The card is free for Costco members.
Cardholders get 3 percent cash back for annual gasoline purchases up to $3,000, and 1 percent back for purchases beyond that. They're also offered 3 percent cash back for purchases at restaurants, 2 percent cash back for travel spending and 1 percent cash back for purchases made everywhere else -- including at Costco, Hobson said.
Using the card extends the warranties on some products, but the downside, Hobson said, is the APR, which is 15.24 percent.
A rebate check is issued every February, and may only be used at Costco, but the value of the rebate may be redeemed in cash at the store, she said.