Are rewards credit cards a good bargain or just another bad debt?

We've all heard the pitches. Rewards credit cards can offer big discounts on purchases of everything from new automobiles to appliances to vacation travel packages. However, these credit cards often carry higher interest rates and restrictions on their use. Let members of the Financial Planning Association of Greater Indiana help you sort out the details. Visit the group's Web site at www.fpagrindiana.org.

Bonnie Struck, Worley Financial Group

They can save you a lot of money, but only if used correctly. These cards are intended to reward frequent shoppers and travelers. Every time you use the card, you earn points or miles that can be redeemed for cash, products or discounts on future purchases.

Is this too good to be true? Well, it can be.

Do the research and read the terms before selecting any credit card. For example, do the points expire at the end of the year, or can they be carried forward? Do I have to pay an annual fee? How many points or miles do I earn for every dollar spent? Spending more may not mean big savings.

If you carry a balance from month to month, it can be costly when using any credit card and more so when using a rewards card. Typically, rewards credit cards have a higher interest rate than regular credit cards. In addition, missing a payment will result in a penalty, and the card company may even raise your rate. A good practice is to make your payments on time and never miss a payment.

Ask yourself, "Am I using my rewards card just to earn points or miles, or do I really need this purchase?" If you are just spending money indiscriminately, then are you really saving money?

Leb Woods, UBS Financial Services

In the right hands, any credit card can be a useful financial tool, and in the wrong ones, it can spell disaster.

Self-discipline is the key here. So if you're the type who tends to spend it now and earn it later, a rewards credit card, more specifically, a revolving balance card where you're required to make only a minimum monthly payment, is not for you. Rather, you should consider using a credit card that requires you to pay the balance in full at the end of each month, thereby avoiding the temptation to make only the minimum payment and maintain a balance on which you have to pay interest.

That said, those who prudently use credit cards should consider the benefits of rewards cards. Generally, these cards promise the user some form of benefit (cash back, merchandise, travel, etc.) based on the dollar amount charged on the card. Since these rewards have become such an important part of credit-card marketing, there are literally hundreds of cards with a huge variety of rewards tailored to specific tastes.

If you're shopping for a rewards card, be aware of the pitfalls. These include reward limits, blackout dates for travel, high annual fees, and other conditions in the fine print of the cardholder agreement.

To find online comparisons of the multitude of credit-card offers available, consumers can visit www.creditcards.com or other sites.

Brent Walker, RJP Investment Advisors

My advice is similar to what I often hear about a good diet -- everything in moderation.

Credit cards are an excellent way to organize and simplify paying your monthly expenses, and rewards cards are a great way to earn cash, points, airline miles, etc. The problem is that credit-card lenders are so prevalent and so willing to advance you more credit that it is very easy to fall into a downward spiral of debt.

The only way a credit card is a good deal for you is if you do not carry a balance. Sure, you can get zero-percent financing for a short period of time, but sooner or later, the low rates end and you have to pay. If you carry a balance, forget about the rewards and aggressively pay those debts off.

If you can pay off the balance each month, reward cards are a great way to manage your monthly finances. Although banks will tell you that debit cards are just as safe as credit cards, I prefer the credit-card approach because you are not outlaying any money until you have reviewed the activity and pay the bill at the end of the month.

Pick a card that does not carry an annual fee, or if you have a reward card already, talk to the company about waiving this expense. A good source for reward information is www.creditcards.com.

• Securities offered through Cambridge Investment Research, member NASD/SIPC. Investment advisory services offered through Worley Financial Group, a registered investment adviser. Cambridge and Worley are not affiliated.
• Leb Woods is a certified financial planner.
• Brent Walker is a certified financial planner.