Personal Finance

Credit card confusion: How do I earn those rewards?

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It's a strange contradiction.

Credit cards that offer rewards are more popular than ever. And yet, many people who have these cards don't really know how they work. They aren't sure how to maximize the points, miles or cash rebates they can get by using them, according to the new J.D. Power 2013 U.S. Credit Card Satisfaction Survey.

The study found that just 59 percent of the customers with a rewards card feel they "completely understand" how to earn rewards, down from 66 percent in 2012. Even more surprising, 33 percent of these cardholders say they are unaware of the benefits associated with their rewards card.

"While most customers change cards for a better rewards program, they often don't fully understand the rewards offered with their current card," said Jim Miller, senior director of banking services at J.D. Power.

How can this be?

"The reward structures are getting more complex as issuers try to differentiate their products and it seems to be confusing their customers a little bit more," Miller explained. "There needs to be a simplification of how you earn the rewards and just better communication, so customers understand how to earn and redeem them."

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When comparing cards, it's easy to focus on the big rewards highlighted in the ads and ignore the rules that spell out how you earn them and how you can lose them. Here's what to look for:

  • Spending tiers: You may need to spend a certain amount within a specific time period to get that highly touted big bonus. For example, the Capital One Venture Rewards Card offers new customers a 10,000 mile bonus, but only if they spend $1,000 on purchases within the first three months of getting the card.
  • Registration may be required: Rewards cards often offer bonuses on certain purchases, such as gas or groceries, each quarter. You may need to sign up for these bonuses. Forget to opt in and you'll miss out.
  • Limits: With most rewards cards, you can only claim so many points each calendar year.
  • Penalties: Miss a payment and you may lose that month's reward and there may be a fee to reinstate them.
  • Terms can change: You need to check the monthly bill inserts for changes to the program.

Keep in mind: Rewards cards typically have a higher interest rate than general purpose credit cards, so they're best for people who pay off their balance in full each month. They may also have an annual fee.

Confusion abounds

Rewards programs are one thing, the basic terms of use are quite another. According to the J.D. Power survey, fewer than half (47 percent) of the cardholders responding said they "completely understand" those terms. Of these customers, 73 percent weren't sure of the interest rate and 31 percent did not know the late-payment fees.

This comes as no surprise to Bill Hardekopf, CEO and founder of the comparison website

"Credit card terms and conditions are very complicated," he said. "You practically need a law degree to fully understand them and I think people get frustrated with that."

The best credit cards

J.D. Power asked 14,000 credit card customers how satisfied they are with their card when it comes to rewards, benefits, terms, billing and payment, customer interaction and problem resolution.

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Overall satisfaction was up slightly for the fourth year in a row—767 points out of 1,000. Miller said that could be because of the improving economy which has many people feeling better about their personal financial situation.

American Express rated the highest for the seventh consecutive year, scoring 816.

"They do a really good job with the rewards. They make it fairly easy to understand and use and they have a great selection of rewards to choose from," Miller said. "And if you have a problem, they excel at resolving that problem in one contact."

Discover came in a very close second, scoring 812. It has a simple product line, a rewards program that's easy to understand and gets high marks for customer service, Miller explained.

"They've also done well at creating a sense of fairness around late fees and other fees," he said.

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Chase, with a score of 783, was the only other major credit card issuer to rank above the industry average.

The banks that rated below average are: Barclaycard (764), U.S. Bank (759), Wells Fargo (757), Capital One (756), Bank of America (749), GE Capital Retail Bank (742), Citi (741) and HSBC (709).

If you ever have an unresolved complaint with your credit card company, file a complaint with the Consumer Financial Protection Bureau.

More information:

Consumer Reports: The Best Credit Card for You

—By CNBC contributor Herb Weisbaum. Follow him on Facebook and Twitter @TheConsumerman or visit The ConsumerMan website.