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Citbank’s Thank You program, for instance, offers prizes that range from a cup of coffee to airline travel. You earn points for using your credit or debit card. Every dollar you spend earns a certain number of points, and they can be traded it later. You also earn points for opening accounts, using direct deposit and taking out loans.
National City offers a similar sort of program for its customers. You can get tens of thousands of points for taking out a home loan, and smaller amounts for establishing direct deposit for your paycheck. Each subsequent deposit or check you write also earns points. The point system and prize schedule is similar to that offered by Citibank.
Are these rewards programs worthwhile? Judging from the nearly ten million people who have enrolled in them, one might be inclined to think so. Keep in mind, however, that there is no such thing as a free lunch. Prizes cost money, and round trip tickets to Europe or week long cruises to the Caribbean are not cheap. If your bank is “giving” these things to you, how are they paying for them? They are paying for them by cutting costs elsewhere or charging higher fees for other services than they otherwise might.
Before signing on with a bank just for the rewards program, you should do some shopping around. You might find out that a bank without a rewards program pays higher interest on certificates of deposit or has lower fees for a checking account overdraft. Perhaps they charge less for checks. or have lower rates and fees for home equity loans. It’s nice to have valuable prizes offered to you for doing business with a merchant, but you should always keep in mind that in the end, you are paying for them, one way or another.
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