However, like any other type of credit card, rewards credit cards are not always created equal and many are more advantageous than their competitors. It is also important to point out that, although millions of consumers benefit from rewards credit cards, they may not always be the best choice for every consumer.

Research Reveals Increased Spending on Rewards Credit Cards

According to researchers at the Federal Reserve Bank of Chicago, for example, it appears that rewards credit cards encourage consumers to spend more and accrue more debt. The researchers found that, on average, consumers earned about $25 back each month in rewards on a one-percent cash back rewards program. However, it also showed that consumers also spent $68 more than they would with a standard credit card during this same period.

The researchers plan to prepare a paper and present it at the upcoming American Economic Association. In short, the paper will reveal that consumer debts grew at a faster rate because consumers reduced their monthly payments and increased their payments when it came to rewards credit cards.

The researchers came to this conclusion after examining nearly 12,000 credit card accounts at an undisclosed financial institution over a two-year period.

The apparent conclusion drawn to this report is that consumers increased their spending because of the rewards offered by the creditor but, in the end, the increased spending and payment of interest rate fees negated any benefit they received from the rewards credit card.

Examining your Spending on Rewards Credit Cards

This report may serve as a very useful wakeup call for millions of consumers who may have never stepped back and examined their spending on their rewards credit cards. It is important to note that failing to pay your balance in full each month on a rewards credit card will likely cancel out any benefits you may receive from the rewards program.

In short, rewards credit cards are best left to consumers who faithfully pay off their balance in full each month.

Plus, there are a number of great credit cards out there that may just make your holidays a bit merrier! Here are our favorites:

• Chase Freedom Visa – Chase’s Freedom Visa, through December 31^st, is offering five percent cash back, up to $1,500, at department stores, grocery stores and movie theaters. Add this to the already one percent you will already earn on all your other purchases, and you’ve got one heck of a good deal! We particularly like the Chase Freedom card because it is now easier than ever to redeem your rewards for gifts.  If that weren’t enough, the Chase Freedom card is also offering a $100 sign-up bonus if you spend at least $799 during the first six months.
• Amazon.com Rewards Chase Visa – If you love Amazon.com (who doesn’t?), you’ll love the Amazon.com Rewards card. You can earn and redeem Amazon rewards points at one cent for every dollar.  In addition, members can earn three points per $1 spent on Amazon.com and two points per $1 spend on everything from gas to groceries. This card features no annual fee, no caps on the points you can earn, and your points will never expire!
• Discover More Card – We love the $100 cash back bonus on the Discover More card, as well as the “double cash back bonus” of two percent on purchases made between November 15 and December 31, all online purchases for the first $1,000 and one percent thereafter. We also like the five-percent cash back bonuses in different categories throughout the year, allowing you to save on everything from restaurants, department stores and gas stations. Combine that with an extra savings of five to 20 percent through Discover’s online shopping portal, Shop Discover and you have a great card for holiday purchases!

Dealing with high balances on credit cards, however, doesn’t have to be a life sentence. In fact, there are a few, simple tips that can have you waving good riddance to those credit card balances, once and for all:

• Pay more than the minimum – Paying just the minimum on your credit cards will surely ensure that you will be spending the bulk of your future paying them off. Even paying just a small bit more each month on your balances will greatly reduce the time you will spend repaying them. Aim to pay double your minimum payment each month; if you can’t swing that, make yourself a promise to pay at least 20 percent more than the minimum balance.
• Make a plea to your credit card company – If you have been a solid customer and have always paid your bill on time, then you will likely be able to swing a lower interest rate on your credit card. Luckily, all it takes is a phone call, so you have nothing to lose! Plead your case for a lower interest rate and you may be very surprised to find that your creditor is willing to comply.
• Don’t bet on rewards programs – Rewards-style credit cards are for individuals who pay their credit cards off each month; they are not designed to benefit those individuals who carry a balance. After all, any type of rewards you may be earning will be quickly erased when you consider the finance charges you pay each month. Instead of hanging onto rewards credit cards, which often come with higher interest rates, switch to a no-frills credit card with a low, fixed interest rate.
• If in doubt, cut it up – If you are having difficulty managing your credit, the very best thing you can do is simply cut up your credit card. Then, work on paying it off.

Well, it is best to start your search online, as many websites will compare credit cards, side by side, according to their APR, annual fee, terms and conditions, and perks. This will give you a broader picture of what types of credit cards may be available to you and what you can expect in terms of APR and promotional rates.

However, beyond that, here are some tips that will help you score the credit card that best fits your lifestyle and your budget:

• Chuck the annual fees – There is simply no reason to pay an annual fee for a credit card anymore, unless of course you are involved in an advantageous rewards program. But for most credit card holders, it just doesn’t make sense to fork over an annual fee for a credit card.
• Think “fixed” in terms of interest rates – You may find a credit card with a fantastic, variable interest rate, but beware that this interest rate can shoot up at any given time. The new credit card legislation has clear boundaries for creditors when it comes to raising interest rates on fixed-rate cards, but variable-rate cards are still fair game. No matter how attractive the offer seems for a variable rate credit card, your best bet is to find a card with a low, fixed interest rate.
• Don’t get pulled in by an attractive introductory rate – Introductory rates, which are often as low as 0 percent, may seem like a great deal. However, introductory rates are just that – introductory – which means that after the introductory period has ended your interest rate can shoot up to very high levels.
• Pass up rewards programs (most of the time) – For the average credit card user, rewards programs are just not beneficial. However, if you are a big spender, and you pay off your card in full each month, a rewards credit card may be worth it.

But what is a small business credit card and how can it serve you as a small business owner?

• Online Tools – Small business credit cards often comes with a wealth of money management tools. These tools, often available online, help you, the small business owner, to track and organize expenses in an effort to maintain accurate records. The online tools offered by many credit card companies for their small business credit cards also enable you to monitor the spending of your employees should they need to make business-related purchases.
• Larger credit limit – Small business credit cards often come armed with a much higher credit limit than standard, personal credit cards. If you are starting your business and need assistance from time to time, then a larger credit limit is ideal for you. In addition, if your business requires that you make large purchases, then a higher credit limit will certainly come in handy.
• Separate from your personal accounts – A small business credit card is a practical alternative to using your personal credit card to make business purchases. In order to ensure accurate bookkeeping, it is important to keep your personal accounts separate from your business accounts; therefore a small business credit card may become very useful.

When searching for a small business credit card, remember that interest rates, credit limits and reward programs differ widely from one card to the next, as do the services they offer to small business owners. It is therefore important to take your time and compare small business credit cards to be sure that you have chosen the one that is best for you and your business.

If you are prepared to handle your credit card debt in a responsible manner, then you should understand the many ways in which credit cards can help you and your credit.

You should have a credit card to:

1. Build your Credit Score - In order to have good credit, you must first have credit! A good credit score typically shows credit in different areas; namely, installment loans and credit cards. Creditors are unlikely to approve you for larger loans such as cars and homes if you have not proven your credit worthiness. And a credit card is the way to show this!
2. Build your Credit History – Just like building your credit score, a creditor simply can’t consider you a good credit risk if you don’t first establish a strong credit history. A great way to establish your credit history is to charge several purchases each month and pay off those purchases in full at every billing cycle.
3. Protect your Investments - Many credit card companies offer purchase protection, which can be extremely valuable if you use your credit card to make large purchases. Each credit card company has different policies regarding purchase protection, but most cover the cost of replacement in case of theft or damage.
4. Take Advantage of Reward Programs – Many of today’s credit cards come with perks in the form of reward programs. From free airfare and free hotel stays to cash-back programs and discounted vacations, reward programs offer fabulous rewards for simply using your credit card for purchases.
5. Protect yourself in Case of an Emergency - A credit card can quickly become your best friend if you find yourself in an emergency situation without cash. A credit card may allow you to replace a broken furnace; it may allow you to purchase last-minute airfare; or it may enable you to have your car repaired. Whatever the reason, a credit card may prove to be extremely useful for those moments in your life when you need financial help.

Learning from Past Mistakes

In past years, credit was flowing freely and creditors were more than anxious to lure consumers in with promises of teaser rates, gimmicks and reward programs. Many of us took the bait and began charging to our heart’s content.

Fast forward to 2009 and things don’t look quite so rosy anymore. Many of us now find ourselves in quite a precarious position; the economy is in a recession and our credit card debt is piling high as creditors dramatically raise our interest rates and add over-the-top fees. Not only are many of us unable to pay down our credit cards, but some of us are simply unable to keep up with the payments and fees.

New Changes Underway

The new credit card bill, which is due to go into effect July 1, 2010, is designed to come to the rescue of the millions of Americans bogged down in credit card debt and unable to get out from under it. But will this new law affect the way creditors lend out money?

Perhaps. We may see fewer promotional rates, fewer rewards programs, higher interest rates and tougher credit criteria, particularly for those with a short credit history. But in the end, credit card companies are still a business, and for those of who have worked hard to maintain our credit, credit will still be available. In fact, competition among creditors will still exist, thereby providing consumers with excellent credit plenty of options regarding credit cards.

In addition, the new law requires that credit card companies must provide cardholders with notice of a rate or fee increase at least 45 days ahead of time, thereby enabling consumers to make a change, if desired.

The bottom line is that the new credit card laws will put the responsible credit card consumer back into the driver’s seat, and will prohibit credit card companies from imposing certain practices that will only leave credit card customers in a no-win situation.

If you are interested in a reward credit card, then you should start by considering your wants and needs. A frequent business traveler, for example, may find that a rewards credit card with hotel points may be the ideal card to have, as the rewards program could result in free hotel stays and other perks.

On the other hand, a credit card that offers a cash back program may appeal to an individual who uses his or her credit card on a frequent basis and will likely earn cash back points.

From airline and hotel points to cash back and gift reward programs, there are plenty of reward credit cards from which to choose.

Points to remember when using a reward credit card:

• Read the details of the consumer agreement carefully, and make sure you understand the terms of the reward program. If you have any questions, contact the credit card company to clarify the card’s terms and conditions before accepting the credit card offer.
• Check your points frequently to make sure there are no discrepancies between your records and the credit card’s records. Many credit card companies offer online accounts which allow you to easily check your credit card point information at any time.
• Use your credit card for everyday purchases to quickly rack up credit card points. Remember: the more you use your credit card, the quicker you will see your rewards points accumulate.

It is important, however, to always make sure you have the cash to back up your purchases, as you will want to be able to pay off your balance in full every month to avoid costly finance charges.

• Make it a priority to pay your account on time every month, as many credit card companies will take away any earned points (and will likely increase your interest rate) if you are tardy on payments.
• If you find that you are not using your credit card enough to earn significant reward points, you may want to consider switching to a no-frills credit card, as the interest rate will likely be more competitive.