BEND, Ore. (CNN/Money) - The average American consumer is expected to spend more than $700 this holiday season, according to the National Retail Federation.
But credit card companies want you to look at the bright side: freebies.
An estimated three out of four cardholders earn rewards on their cards, about twice as many as four years ago. Though airline miles are still the most popular reward, credit cards have rolled out plastic catering to every niche.
"Marketing gimmicks are pretty popular right now," said Linda Sherry of Consumer Action, a nonprofit consumer group that surveyed 45 credit card companies earlier this year. "Issuers have to try to separate themselves from the pack."
There's the Starbucks Duetto Visa, which automatically credits caffeine fiends with $1 worth of "Duetto Dollars" for every $100 they charge on the card. Charge $700 and you have two free lattes. How grande.
Chase cardholders who join the Ultimate Rewards program can claim points for the usual stuff -- travel, apparel, electronics -- or as I was told by a service representative, to pay off your mortgage faster.
Well, not that fast. You'll need to charge $18,000 to earn $150 "Mortgage Bucks." Carry a $5,000 balance for a year and you could easily pay twice that amount in interest payments. The Citi Home Rebate Platinum Select card, meanwhile, earns a 1 percent rebate applied directly to any mortgage.
Parents who charge their Toys "R" Us splurges to their Toys "R" Us Visa earn a 5 percent rebate, or $35 in more Toys "R" Us stuff for spending $700 at the toy chain.
Environmentalists can sign up for a Defenders of Wildlife Visa, the Whitetails Unlimited MasterCard or one of the other feel-good affinity cards issued by MBNA, which contributes to the affiliated organization when you use the card.
Hundreds of colleges and universities have similar alumni affinity cards, as do the Smithsonian, the Elvis Presley foundation and the Humane Society of the United States, to name a few others.
Every little bit counts, but you'll need to shop your heart out to make much of a contribution. Affinity cards like these typically pay organizations anywhere from 25 cents to $1 for every $100 charged.
Several issuers, including Capital One, have been promoting airline cards that earn points redeemable on any airline, with no seat restrictions. In most cases, though, the miles you earn with the card can't be combined with the miles you earn by actually flying, according to Consumer Action.
Gas guzzlers may be getting the best deal of all. When you fill up your SUV and charge it to a Hess Platinum Visa, you stand to save about $5 during the first few months. The card has no annual fee and earns 10 percent rebates on gas charges during the first 90 days and 5 percent after that.
For the cardholder who has everything, issuers in Europe are testing credit cards that have lights, make sounds or come in jewel-encrusted cases.
Don't be blinded by rewards
As with any card, you'll want to look past the creative marketing and first consider how much the card is going to cost you.
According to Consumer Action's 2004 survey of issuers, annual fees for reward cards average about $50 a year. At that rate, you'll need to charge more than $1,000 to break even on a 5 percent rebate and more than $5,000 for a 1 percent rebate.
Although the interest charged for reward cards is only slightly higher than with plain vanilla cards, this should still be a consideration if you don't plan to pay your balance in full every month -- as is expected to be the case with 30 percent of all consumers this holiday season according to Chris Viale, general manager for Cambridge Credit Counseling.
Late payments are another consideration. The majority of credit cards levy late fees of $25 to $39 if a payment is at all late, and most invalidate all rewards for that billing cycling.
On top of that, many will increase your interest rate. Of the issuers surveyed by Consumer Action, 31 percent said they would hand down a penalty rate for one late payment, and more than 35 percent said they do so after two late payments in a six-month period.
"To me, having a good card with a low rate that doesn't zap you with late fees is a better way to go than all of the gimmick cards," said Sherry.
Still, assuming you charge regularly and pay your balances in full, rewards cards can make sense. With so many kinds of cards on the market, chances are you'll find one that suits your toy-buying, earth-loving, latte-drinking self.
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