Charge it. Get something back. It’s the new mantra among the nation’s largest credit card companies. Gone are the days when a pen or photo frame arrived in the mail as a thank-you for being a loyal customer. Reward programs are becoming more popular and better than ever, as card issuers offer gift certificates at your favorite store, discounts on airfares and cars, and even hard cash to nab your business.
Many consumers are interested in reward credit cards because they make it possible to complete routine purchases while receiving special rewards. Common rewards provided by these cards include airline miles, gift certificates to restaurants and stores, cash, and unique gifts. Most major credit card companies are becoming specialized in designing credit cards with savings to suit a variety of lifestyles. The best rewards credit cards come with no annual fee, but they usually require good to excellent credit ratings. Read the credit card offer closely. Some rewards cards have high interest rates or annual fees that cancel out the special benefits. Make sure you understand how the rewards are calculated and redeemed.
There are different types of credit card rewards offered by different credit card companies or banks. You need to determine what rewards you can use and then calculate how much you get for each dollar you spend. For instance, if you are not a frequent traveler, it would make no sense to opt for a credit card with travel rewards. You pay prefer a card with cash back rewards or points toward purchases at your favorite stores. Ultimately, it’s best to find a card that offers rewards that suit you.
While choices for specific credit card rewards program are numerous, most of the programs fall into one of three categories:
- Cash Back: A rewards program that offers cash back based on a percentage of the total purchase price. The money due back to the customer can be accepted as cash or credit, donated to a charity of choice, deposited into another type of bank account, or even sent directly to a mortgage company to be applied against the principal owed on a home.
- Theme Rewards: Credit cards with theme incentives allow the cardholder to choose a category that interests them. Over time, the cardholder can earn points that go into a “point bank.” Once enough points are earned, the cardholder can cash in the points for a prize related to their chosen theme. For example, a person who likes to ski may earn points towards ski lift tickets, new ski clothing or equipment, or free lessons at a participating ski resort.
- Basic Rewards: One of the original credit card rewards programs is providing a reward for every dollars charged to a card. The most well-known example of this is providing one frequent flier mile on a chosen airline for every dollar charged to a credit card. Once enough miles have accumulated, they can be traded for a round-trip airline ticket.
Whichever your choice, it makes good sense to get something back when you choose to use credit. If you?re a frequent credit card user, the rewards can certainly add up. Donî–¹ let your lust for miles or other rewards lead you to damage your credit score, the three-digit number that lenders use to gauge your credit-worthiness. Keep in mind that maxing out any credit card can ding your score, even if you pay the balance off in full every month.
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