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An Introduction to Credit Card Rewards

[ 0 ] January 29, 2009 | admin

The “rewards” a cardholder receives from the credit card’s issuer are presented according to the number of purchases the cardholder makes with the card.The variety of rewards offered by credit card companies is virtually endless, with some of the popular rewards being air miles or discounts off of the cost of certain airline’s flights.It is possible to earn discount points toward the purchase of a new car, and there are some retailers and stores which give you loyalty rewards for using a card issued in their name.

However desirable some of the rewards offered by some credit cards might be, the question that must be asked is whether or not these rewards are worth it.If you make a comparison of the interest charged on purchases made with the cards that have rewards and the ones that do not, you can answer this question easier.The lowest rate of interest on these types of cards is usually about 15% APR even though there are several credit cards that offer some kind of  loyalty bonus or reward.This interest rate is much more than the zero percent interest rate on the introductory offers of many other credit cards and about 7-8% more than the interest rate of a basic low-interest credit card.Across the whole range of reward cards, the interest rate comparison becomes even more alarming, with some interest rates exceeding well over 30% APR.

If your credit card is one of those that has these higher rates of interest and you are using it to earn enough points to get the types of rewards you want, it may be a better idea to switch to a lower interest credit card and save money instead of reward points.If you are the kind of credit card user who always tries to pay off the whole balance on the card before the payment is actually due, and who therefore never pays any interest, the rewards for using your card are genuinely free.Unless you are sure that you can pay off all of the total balance on your credit card every month, you may want to use an alternative such as the cash back credit card.The way the cash back credit card works, is to pay cash back to the card user in accordance to what is spent on the card each month and this is also the same basic working principal of the credit cards that offer rewards.

You will be paying an excessive amount for the use of a cash back credit card, if the amount you spend attracts the 19% APR in interest and the current best cash back rate is somewhere around 5 percent on the spent amount.The interest charges can be avoided and the 5% cash back can be put into your own pocket if you are one of the consumers who is in the habit of paying all of your outstanding balances each month.

Credit cards with rewards and their family members, cash back credit cards can therefore, be worth it, when you are maintaining a personal policy of repaying any balance on the card, before it starts to attract interest.Your personal financial picture may be given a brighter focus when you are using these cards that offer rewards and cash back.

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Category: Credit Cards

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