A Summary of Reward Credit Cards
Reward credit cards do exactly as the name says, reward you for your spending in one way or another. Providers of cards such as these will often target consumers who have particular spending habits, and will feel that they are getting good value from their card, and continue spending on it.
These can come under many guises. Just some of the many categories of benefits include gas, points, retail and travel. The cards will often reward the customer with cash back incentives and rebate programs when they spend on these agreed products or services.
One of the most common groups is a miles card. These work in exactly the same manner as regular credit cards, with an agreed limit, annual percentage rate of interest (APR) and a minimum monthly payment, but will also provide a certain number of ‘miles’ (or frequent flyer points) per dollar spent on air travel using the card. The miles can then be accumulated and put towards future air travel.
Another extremely common example is cash back reward cards. In a similar manner, these will offer a certain percentage of cash back for every dollar spent. A common figure is one percent, meaning for every $100 you spend on the card, you will receive $1 back in the form of a rebate. Quite often the percentage rate of cash back will also be increased for spending in certain categories, such as travel, utilities and dining, up to and above five percent.
There are several advantages of cash back rewards cards. Although one percent cash back does not sound like a considerable amount of money, for big spenders that pay their balance off in full every month, the total amount of cash back can really stack up. They can also provide incentives and offers that will entitle you to hefty discounts off the things you enjoy most in life.
Rewards are not just confined to travel miles and cash back. Providers are always thinking up new and unique rewards to entice customers, including DVD rentals, tickets for family attractions (such as theme parks), movie tickets and money off household appliances. Whatever your interests in life, there is every chance that there is a reward card for you.
The downside is that, generally speaking, customers require an above-average score in order to be approved for them, and some types of reward cards require an excellent rating – something that is not easy to obtain.
They can also carry slightly higher rates of APR, meaning unless you pay off your balance in full every month, you are actually paying for your ‘rewards’ in the form of higher interest rates. If you are planning on carrying over a balance from month to month, you should consider looking at a standard card that offers you a lower rate of APR.
Despite the drawbacks, reward cards warrant serious consideration when searching for your next card. Shop around for the best deals and the cards that best match your lifestyle, and you could find yourself gaining some significant benefits.
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