Credit Card Rewards That Pay Off

September 27, 2013 Updated Jul 12, 2010 at 10:49 PM EDT

By Eric Starkman (Forbes.com)

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Credit Card Rewards That Pay Off

September 27, 2013 Updated Jul 12, 2010 at 10:49 PM EDT

BUFFALO, NY (ABC/FORBES.COM) -- Airline miles and hotel affinity programs are the fool's gold of modern times, I argued in my previous column. But like the prospectors of old, knowing the odds are stacked against us doesn't stop us from dreaming of rich rewards. If you do your homework and ask the right questions, you can still find cards with some luster. Below are three rewards programs that I think are well worth a look.

Charles Schwab Bank Visa

If there is a better, more transparent credit card rewards program available with comparable customer service and support, I would love to hear of it. Schwab's card, which has no annual fee, offers cash rebates equal to 2% of all purchases each month. I've twice used these rebates for upgrades on Virgin America, underscoring why cash is better than frequent flier miles.

Another advantage of the Schwab card is that, unlike many rivals, it carries no foreign currency conversion transaction fees when it's used abroad. Customer support is also stellar; I've always managed to get a live person on the phone within a minute, and Schwab's phone reps have been impressively knowledgeable, helpful and extremely enthusiastic.

I'm also impressed with the card's security. The morning after I'd purchased a wide-screen TV recently, I received a call from Schwab Visa asking me to confirm the transaction. Some people might regard this as a tad Big Brotherish. I disagree. Given that credit card companies don't hold customers responsible for fraudulent payments, it seems reasonable for them to aggressively monitor for suspicious activity and keep costs down for everyone.

There are some major caveats to my Schwab card recommendation. Until the practice was prohibited by law, Schwab charged users who paid bills over the phone a fee. That's opportunistic nickel-and-diming in my book because it costs the bank virtually nothing to process the payment.

Such a mindset doesn't foster trust, nor did Schwab's peddling of some highly dubious products, including quasi-money market funds called Schwab YieldPlus and long-term bonds known as auction rate securities. It's possible that Schwab's attractive card program is intended only to aggregate customers and that it eventually will reduce benefits. Given Schwab's spotty past behavior, if you use its card be sure to carefully monitor your statements and notices of changes in terms.

Nordstrom Bank Visa

Nordstrom is a class act with a well-deserved reputation for doing right by customers, and that integrity extends to its credit card business. I inadvertently missed the due date for my first monthly payment, and the company gladly waived a late fee. Since I no longer actively use the card, I overlooked a small payment due last month, but wasn't dinged with a $39 late fee. When I asked why, the customer service rep said my balance was so small that a $39 fee would have been inappropriate. Nordstrom Bank's customer service is as stellar as its department stores.

Nordstrom's rewards program works like this: If you use the card at its stores or online, you get two points for every dollar you spend. If you use the card anywhere else, you get one point. For every 2,000 points you accumulate, you get a $20 Nordstrom "note" that can be used as cash at any of the company's department stores or outlets.

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