Questionable Recommendations About Reward Credit Cards

Although many people consider Consumer Reports the final word about everything consumer-quality related – autos, sports equipment, financial services, clothes, appliances, etc. – we’ve never been impressed. In our observations, for product categories that we actually know about really well, Consumer Reports just about always misses the boat. It seems that CR assigns values to aspects of a certain category of product that really aren’t important, and then has non-experts write/research the articles. We’ve seen it over and over in various categories, which makes us skeptical of their reporting in other categories.

This all is leading up to the recent CR story about reward credit cards (“The Best Cash-Back Credit Cards”). There is a bit of solid advice in the article, but then they throw in something like this:

“‘Invariably, if you see a 5 percent card, there will be restrictions or other strings attached,’ [Curtis] Arnold [founder of U.S. Citizens for Fair Credit Card Terms] says. He points to Discover’s Open Road Card as an example. The card pays 5 percent cash back on gas and auto maintenance, but the fine print says that applies only to the first $1,200 you spend in the category. Another example is the Discover More Card, which also pays 5 percent on purchases in certain designated categories, but they change four times a year. ... But the right card can pay off handsomely. Arnold says he and his wife use American Express’s Blue Cash card, which, after you charge $6,500, pays 5 percent back on further purchases the rest of the year in supermarkets, drugstores, and gas stations, and 1.5 percent on everything else, with no limit on the reward amount.”

So CR is saying to avoid the card that doesn’t pay more than a certain amount (Discover), but use a card (Amex Blue) which doesn’t pay until a certain amount? And both have the “5%-strings-attached” feature. Huh?

The article then presents CR’s favorites, saying: “We screened out cards that charge an annual fee and selected among only those that rated five stars in Cardratings.com scoring...” We also dislike annual fees, as they effectively reduce your reward percentage, but for many users an annual-fee card can offer many worthwhile additional benefits.

But our biggest complaint is that the Consumer Reports recommendations are based on reviews from the cardratings.com website (which, by gosh, is the website of Arnold’s U.S. Citizens for Fair Credit Card Terms). Cardratings.com is an affiliate-marketing website first and foremost (in that every click to a card company’s application earns cardratings a commission) and an unbiased review site a far-distant second. For example, on the first page of cardratings “Featured Frequent Flyer & Travel Reward Credit Cards” section, one-third (3 of 9) of the cards are Capital One No Hassle cards. Most knowledgeable observers of the travel/reward-card world think Capital One cards have some of the poorest reward programs going. (In fairness, we actually like the card for its 0% foreign-exchange fees, but as a reward system it’s way down in the pack.)

We wholly agree with CR that no one should even consider a reward card if they carry a balance – just go for the lowest interest rate. But for those who pay off their cards every month, there are many superior cards to the eight best on Consumer Reports’ list, which includes two Discover cards (which they seemed to slam earlier in their article) and a 1% cash-back Capital One card (if you can’t get better than 1%, you’re not even trying).

The CR article is now making the media rounds, with CNN Money doing their article about the CR article in their “Raw Deal: Tales of Economic Injustice” section. The title of the CNN Money article about the CR piece? “Credit Card Rewards Are A Real Rip Off.”

That kind of reporting gives us a headache. We don’t know which bothers us most: CNN Money misrepresenting the CR article with an inaccurate and inflammatory headline, or the original CR article and its questionable recommendations.