The founder of personal finance tool Billshrink on how to avoid getting caught in the tangle of complicated reward bonuses.

Question: Are credit card companies trying to trick us?

Peter Pham: They are not necessarily tricking you; I think what it is is the redemption is pretty big. And if you are a person who really never gets on an airplane, why get an airline reward card? Or if only stay at a specific hotel or if you really want cash, it really makes a difference because each one redeems differently in each one of those categories and also you're spending patterns. Do you go out to restaurants? Do you travel? Are you grocery shopping? Are you buying with these things?

A lot of these cards have very complicated reward bonus, like 3 points for every dollar spent here, 2 points for every dollar spent here. It makes most people pretty dizzy. What we are trying to do is just very simply present that to you what you should be doing to earn the most amount of money from using your credit card.

Question: Is it wise to own more than one credit card?

Peter Pham: There are a couple of things. One is a couple credit cards is okay, in my opinion; probably two. I, for example, have a Visa and an American Express. It does a couple things. One it does help build your credit. I do pay off my credit card every month. In having that gap of how much of a credit line you have versus how much you spend. Your debt to available credit ratio is something that will help build your credit and I prefer to use my credit card mostly for receipts and tracking as an individual, but paying off those credit cards means I get to earn a tremendous amount of reward points and then I get to go spend on when I actually have time to travel outside of work on vacation.

So I think credit cards have its place for folks that are disciplined and having multiple credit cards is okay as long as you don't let yourself get out of control. It's okay for a lot of folks to have a gas card, a credit card that they use for buying every day groceries and items, and another credit card maybe just for travel. But I definitely recommend people kind of keeping control of credit cards getting out of control.

Question: What can we do about the glut of choices out there?

Peter Pham: I think the big companies believe that lots of choices are good but fundamentally a lot of it is built around quantity of services and products. Selling packages and a great example would be television services. Are you Comcast, DirecTV, Dish; what should you do when all I want to do is watch ABC and NBC? Understanding all of your options gets more and more complicated because, a, of competition and, b, I think they're trying to create more dynamic pricing in the marketplace to get more customers, sell kind of promotionally pricing and products, package it sexy or so that it can market. It actually is the opposite. What happens in the market is you get more confused and people understand, "Wow. This new service or plan is now out. How is that different from what I currently have? Is it the same thing and they're just calling it something different, which by the way a lot of cases is what happens, or is it really better or is it worse?" So then you have consumers just kind of confused.

There's a lot things happening to credit card merchants. One is the Credit Card Act of 2009 to credit card holders bill of rights. A lot of it is pushed through by Congress and the House really trying to legislate some rules around helping consumers understand these bills and not getting exhorted interest rates, not gaining penalties on late fees, et cetera.

There's a lot of really interesting laws that are going into effect which again adds to a layer of confusion for people to say, "Well, which cards are fair, which ones aren't, which ones are complying with the law and which one's are good for me as an individual." So we're big proponents of that and we actually have an interactive credit card bill holders bill of rights on our website where we track every single card and which rules they're following and which ones they are not.

The industry is coming along but fundamentally no matter what service that we go and help people with, what we're finding is gosh the number of choices are unbelievable. So working with professor [Richard] Thaler, looking at data, how do we help.? How do we really help consumers figure all this out because if you look at your wallet and you look at your bills that you pay every month, we're touching things that are 20, 30 percent of household income.

Recorded on November 4, 2009