Credit card rewards help foil recession
By Cindy Waxer • Bankrate.com

Tough economic times are changing the way Americans collect and redeem credit card rewards program points.

Gone are the days of hoarding loyalty and rewards program points for an all-expenses-paid trip to Paris or a weekend romp in Las Vegas. The recession has brought consumers' point redemption habits back to earth -- literally.

For the first time in history, more U.S. consumers belong to credit card rewards programs than to airlines' frequent-flier programs, according to the 2009 Loyalty Marketing Census conducted by Colloquy, a Cincinnati-based provider of loyalty marketing publishing, education and research.

Loyalty points and cash-back bonuses on everything from gasoline and groceries to theme parks and movies offer real help to consumers struggling to make ends meet, says Ken Clark, a Certified Financial Planner and author of "The Complete Idiot's Guide to Getting Out of Debt."

"If you're already a credit user, these programs offer some more practical rewards than mileage programs," Clark says.

That's good news for borrowers shifting spending habits from luxury items and dream vacations to everyday essentials.

How can loyalty programs help you get through tough economic times? Here are some ways to maximize the returns -- and avoid the fine-print pitfalls -- of today's rewards programs.

Cash is king
These days, there's no shortage of rewards program choices. Some companies allow cardholders to collect points for every dollar they spend. Those points can then be redeemed for gift certificates at specific retailers. Others offer savings at grocery stores, restaurants or gas stations.

However, one type of rewards program still trumps the rest when it comes to helping consumers boost their bottom line in tough times, says Ruth Susswein, deputy director of national priorities at Consumer Action, a San Francisco-based national nonprofit organization specializing in consumer protection.

"Of all the different rewards programs, cash back still offers the most value," Susswein says.

That's because consumers can use cash anywhere for any purpose "as opposed to being locked into a certain program," she says.

What's more, Clark says cash-back programs offer faster returns at lower levels of spending when compared to other programs. For example, mileage programs may require cardholders to spend upward of $30,000 to earn an airline ticket, Clark says.

Some financial institutions are making it even easier for consumers to use cash-back savings to fatten their wallets. For example, such cards may reward customers with 1 percent cash back on credit card purchases and then automatically transfer the rebate to pay off debt, build savings or pay down mortgage principal.

"In the end, maximizing the value of a rewards program entails finding a card that meets your unique needs," Clark says.

"Ask yourself, 'What's my lifestyle like and what are my spending habits?' Then, match up your answers with a card's fine print," Clark says.