"Rewards cards are famous for offering these really cool incentives but if the annual fee is 30 (percent) or 50 percent higher than a nonrewards card, it erases half the benefit you're getting," Clark says.
A high interest rate can also undo any savings. This isn't a concern for borrowers who pay off their debt in full every month. But failing to pay off a balance for even a month or two could potentially wipe out all potential savings in one fell swoop.
"Rewards cards aren't exactly known for carrying a low interest rate, particularly past the introductory period," Susswein says. "So if you're paying a lot of interest, your reward gets eaten up."
Finally, remember that it's a mistake to run up credit card debt simply to collect a few extra rewards, says Kelly Hlavinka, a Colloquy partner and co-author of the 2009 Loyalty Marketing Census.
"Consumers should obviously pay attention to the terms and conditions on these programs," says Hlavinka. "Certainly, we would never be proponents of consumers maxing out their credit cards in order to take advantage of rewards programs."
Laying down the law
Recently, President Barack Obama signed credit card legislation that restricts certain credit card practices. The legislation's passage should prompt consumers to "keep a careful watch on the rules related to a rewards program," Susswein says.Opinions differ about whether the new rules will impact rewards programs negatively or positively.
Susswein predicts some card companies may try to slip in new limitations on rewards programs, restricting where borrowers can redeem points and adding redemption expiration dates.
On the other hand, Clark says the stringent lending laws may also work in consumers' favor. For example, the combination of the ongoing credit crunch and the new restrictive laws may force companies to reject an increasing number of credit card applicants.
As a result, predicts Clark, as financial institutions get more "desperate" for customers, they might "up the ante as far as rewards" by offering more and better programs.
"Of course, they may bury more details in the fine print, but the initial change will probably be positive," Clark says.
Regardless of how rewards programs change, one truth remains the same: Consumers need to be smart about their purchases if they hope to turn their rewards card into a recession-busting tool.
"Consumers still have to be smart about how they spend their money," Hlavinka says. "But when they choose to use plastic, it makes sense to pay attention to those institutions that are rewarding them for their loyalty."