Get Your Fair Share of Free Bank Money

With all the furor over debit card fees, you'd think that banks had absolutely nothing to offer any of their customers. But in stark contrast to the debit card environment, banks are loosening the purse-strings on credit card offers -- and if you're smart, you can take full advantage and cash in while the money lasts.

What the Street taketh away, the Street also giveth
Millions of taxpayers and bank customers alike are furious at Wall Street banks for imposing fees on what have become basic banking services. With Bank of America (NYS: BAC) and Wells Fargo (NYS: WFC) among banks looking at monthly charges for debit card use, it's apparent that big banks are trying to make up for the loss of revenue that new regulations have imposed on them. Other banks, including PNC Bank (NYS: PNC) , have ended rewards programs on debit cards, while even free checking is at risk of nickel-and-dime fees.

But at the same time that big banks are trying to milk debit cards for every penny they can get, they're paying some amazing rewards to try to get people to get new credit cards. Consider some of the most recent deals:

  • JPMorgan Chase (NYS: JPM) is offering a preferred version of its Sapphire card. If you spend $3,000 during the first three months you have the card, you get 50,000 reward points -- which are worth a whopping $625 if you use them for travel, or $500 as cash.

  • Earlier this year, Capital One (NYS: COF) did a promotion to match up to 100,000 airline miles in new cardholders' frequent flier accounts. Deals to receive 50,000 to 75,000 miles on various programs have become almost commonplace.

  • American Express (NYS: AXP) offers its Blue Cash card with a relatively modest $100 signing bonus, but it offers an unlimited 6% rebate on groceries.

Most of these cards charge annual fees, but they usually come with fee waivers for the first year. That makes them no-brainers to try out -- and if the deals end up being worth the annual fee, then you can keep the card at renewal time.

Why is this happening?
Banks have always understood that credit cards were potentially a far more lucrative product than debit cards. With debit cards, fee revenue from merchants was the primary source of income, and with that drying up because of new fee limits, the niche doesn't have the profit potential it used to have. Part of the reason that prepaid-card specialists like Green Dot (NAS: GDOT) have better prospects is that the new debit-card regulations don't apply to prepaid cards -- at least for now.

By contrast, credit cards earn banks revenue from both ends of a transaction. Not only do they reap interchange fees from merchants, but they also get to charge the often sky-high finance charges they collect from cardholders. And with delinquency rates having come down over the past year, the risks to banks from credit cards have fallen.

From a customer standpoint, though, credit card rewards are your opportunity to cash in on the banks without falling for their sales pitch. Rewards encourage people to spend more, getting less-disciplined cardholders to get in over their heads and start having to pay monthly finance charges. But if you make sure you pay off your balance every month, you can take advantage of those rewards without paying the price for them further down the road.

The time is now
Many people complain how banks charge fees for things they should provide for free. Credit card rewards are a way to turn the tables on that troubling trend by grabbing free money while the getting's good. In the ongoing battle between Wall Street and the common citizen, the credit card battlefield is one place where financially savvy customers can win.

The funniest part of the new credit card wars is that credit cards themselves may soon be practically worthless. Read this Fool special report on how new technology will make cards a thing of the past.

At the time thisarticle was published Fool contributor Dan Caplinger has been a credit card reward "deadbeat" for more than 20 years. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Wells Fargo, JPMorgan Chase, Bank of America, and PNC Financial. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy gives you your fair share.

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