Understanding Rewards Credit Cards
If you are someone who already uses a credit card for the majority of your day-to-day purchases and then pay off the balance each month, a rewards credit card might be the right choice for you. By using a rewards credit card as opposed to one without the added benefits, you are given the opportunity to earn some tangible benefits for doing so. This is because with a rewards credit card, every time you make a purchase, you are able to earn points. These points can then be redeemed for cash back, hotel rooms, flights, or other rewards. If you are one of the many credit card users who pay off their credit card balance every month and successfully avoids the additional interest charges, a rewards credit card might be the right choice for you. After all, they are a fantastic way to get even more out of your daily purchases.
The Most Common Rewards Cards
What Kinds of Rewards are available?
To put it simply, rewards credit cards are simply credit cards that offer rewards and other incentives for customers who use their credit card for purchases.
One of the reasons so many people love reward credit cards is that there are many options to choose from. The most common kinds of rewards that customers can earn are free gas, travel points, store points, and cash back. Gas credit cards are just that they give you the ability to earn free money that can be used at specific gas stations. Travel rewards credit cards provide customers with travel points each time a purchase is made. These then accumulate and can be redeemed and used towards purchasing either airline tickets or hotel stays. Store credit cards are credit cards that are offered by specific retailers. Points are accumulated with each purchase made and can be redeemed for merchandise in their stores. And finally, cash back credit cards provide cash rebates on purchases. These typically fall within the range of 0.75-4.00% depending on the card you get. Your rebate will then be applied either as a credit to your account – which will appear on your statement or a cheque.
It should also be noted that rewards credit cards tend to also offer other benefits, in addition to the reward points already described. These often include concierge service, free travel insurance, discounts such as free airport lounge access, purchase protection, and more.
What are the Differences Between Tiered Versus Flat Rewards
While there is a wide assortment of reward options, how you earn the points varies as well. For example, you may earn a specific number of rewards for every dollar that you spend. Or you might earn a smaller amount for the first set amount of dollars that you spend during the first year. Then a more significant amount of rewards after you have passed a threshold. At the same time, other credit cards pay higher rewards on specific categories and a smaller reward on any other additional spending.
Is It True that Most Reward Credit Cards Have an Annual Fee?
Rewards credit cardholders do pay an annual fee for the privilege of using the card and being able to take advantage of its benefits. While the unfortunate thing is that the yearly fee can seem high, if you use your rewards card enough, the points can easily outweigh the annual cost of the card. However, if you don’t use your credit card enough or do not redeem your points, a no-fee credit card that does not offer the same amount of rewards may be a better option.
Benefits of a Rewards Credit Card
- Possible annual bonuses. With some rewards cards, if you have managed to pay off your balance and used your card enough, you might qualify for yearly bonus points.
- There are rewards to suit any taste. As stated earlier, there are a wide assortment of rewards available. These include cash back, travel, and gas.
Drawbacks of a Rewards Credit Card
- If you do not pay your credit card off in full, you risk losing your points.
- If you do not use your card enough, you might not earn enough points to actually use.
- Reward credit cards tend to have a high annual fee.
- Rewards Don’t Necessarily Last Forever- Some credit card reward programs let your rewards expire if you don’t use them within a specific time period.
Choosing the Right Rewards Credit Card for You
When selecting any new credit card, or any financial product for that matter, there are a number of questions you really should ask yourself prior to applying. When it comes to reward credit cards, it is no different, here are a few of the questions you ought to keep in mind while trying to decide which reward credit card is right for you.
How can You Get the Most Out of Your Reward Points?
If you want a reward credit card, it is essential that you figure out how you can make the most out of it. For example, if you’re a frequent traveler, then you might want to consider a travel rewards program that can help you earn more rewards than what you would get with a regular rewards card.
At the same time, if you aren’t much of a traveler but might be interested in a card that helps you get the most out of your day-to-day purchases, then you might want to look for a card that offers a higher reward rate on those kinds of purchases. For those who are unsure about what they would prefer, perhaps a cashback card is something you should consider.
Another essential piece of information that you will want to have prior to choosing a reward credit card is how long the points are valid for. You can find this information by reading through the terms and conditions of each card. There the company will state whether or not points expire, or simply add up as time goes on. If you are considering a travel rewards card, it is also a good idea to look into potential blackout dates. This information can also be found on the terms and conditions of the card.
Does My Credit Align with the Kind of Reward Credit Card I Want?
The unfortunate news is that if you do not have excellent credit, you are not likely to be approved for a rewards credit card. While you will have to read and review the terms and conditions of each card to see what specific financial requirements are necessary in order to obtain the card, rewards cards are not generally easy to get, especially if you have less than stellar credit.
Some rewards credit cards come with high sign up bonuses. These are great options if you have specific reasons for wanting the card and a goal for actually accruing and redeeming your points, such as free gas, airline tickets, or hotel stays. Credit cards that offer high sign up bonuses generally have a minimum spend amount. This means that you will have to spend a specific amount within a few months prior to earning that signup bonus.
Look into the Transferable Point Programs
Some of the credit card rewards programs that are available also have transferable points. This means that you can earn rewards points as you normally would, and then transfer those same points to another points program. Now, this can only be done if you choose a reward credit card that has a program partner that has a benefit you might want to take advantage of. For example, these rewards can sometimes be transferred from one reward credit card into another one for either hotel stays, or airline frequent flier miles. Again, this information can usually be found in the terms and conditions section. Because these transfers and partnership programs can be quite confusing, customer service can also assist with any questions you might have regarding these details.
As you can see, there are a wide assortment of credit card reward programs that are available today. As long as you take your time and research the options that are available to you, you will be able to find a great card to suit your needs and finances. This means that it is crucial for you to understand and be knowledgeable of your spending habits. As long as you are well informed and use your rewards credit cards in the right way, are sure to pay off your balance at the end of every month, you will enjoy all of the many benefits that reward credit cards can offer.
How Airline Miles Credit Cards Work
Airline miles, commonly referred to as travel points or frequent flyer miles, are part of a highly established loyalty program which is offered by credit cards and airlines. Generally, you accumulate a set number of miles; this amount is based on how often and the distance that you fly, as well as how much you spend on your credit card. Cardholders can then use these miles to buy tickets. Our airline miles credit card reviews help you choose the best card.
How Balance Transfer Credit Cards Work
To put it simply, balance transfer credit cards allow you to move your debt from one credit card to another — essentially allowing you to pay off one credit card with another. Typically, a person will transfer their balance to a credit card with a lower and more manageable interest rate, thus allowing them to save some money on their monthly payments, or potentially pay off the entire balance in a more timely manner. For example, if you find yourself paying 12 percent interest on a $3,000 debt, you will have a $560 payment for the next six months in order to pay off the balance. However, if you transfer that $3,000 balance to another credit card, one that does not charge any interest for the first six months, your payments will be lowered to $500.
How Cash Back Credit Cards Work
Getting cash back when you use your credit card is a type of reward system that some lenders choose to offer in order to make their cards seem more attractive and more beneficial to the average consumer. Some of these credit cards promise a fixed amount back as long as you use a card during a specific time window, while others do so on the condition that you transfer a balance – a cash back card is slightly different. A cash back credit card is where you get back an agreed percentage of the money you spend back.
How 0% Zero Introductory Interest Rate Credit Cards Work
Low introductory rate credit cards are among some of the most appealing credit cards. To clarify, an introductory rate is a low-interest rate – sometimes as little as 0% – that applies to your balance for a set period of time after you open your credit card. Introductory rates are typically given to applicants with high credit scores.
Depending on the card that you are looking at the introductory rate may apply only to a specific type of balance. A great example of this is balance transfers. There are several low introductory cards out there that only offer that low interest rate to balances that were transferred from a higher interest card. That said, there are also a lot of credit cards that apply the introductory rate to both balance transfers and new purchases.
How Travel Rewards Credit Cards Work
A travel rewards card is a credit card that carries a travel-related incentive or “reward” for use. The more you use it, the more points that you accrue, the more points you can put towards airline tickets, rental cars, or hotel stays.
Travel reward credit cards are extremely popular and often offer the best rewards value. They also have a tendency of providing considerable sign-up bonuses, exclusive perks, and insurance packages.
While all of those benefits can be great, travel rewards programs can quickly become more complicated than what a lot of people initially assume. One of the ways these rewards can become more complicated is by their offering numerous ways and times that you can actually use your points, be it blackout dates, hotel, or airfare there are a lot of factors customers have to keep in mind. With so many options, making sure that you are getting the best value involves doing some serious research and planning.