Are Reward Credit Cards Really Rewarding?
We often hear that credit card companies offer reward credit cards to their clients as an “appreciation” or “reward” for their support.
But don’t forget that it’s still all about business. Credit card companies gain more by offering reward credit cards – they get more clients and they get more credit card purchases.
What Type of Reward Credit Card Suits You?
When it comes to accepting a reward credit card offer, we all have to be wiser and more careful about choosing. Reward credit cards come in various categories – frequent flyer miles, gas reward credit card, shop reward credit card, and the cash-back credit cards.
Different credit cards often use the same reward system in providing their promised bonuses- the card holder earns a reward by collecting points each time he uses the card for purchasing. Obviously, the more you spend on your credit card, the faster you earn your reward.
What type reward credit card suits your lifestyle is also an important factor in your decision.A frequent flyer miles reward card will only be beneficial if you’re a frequent traveler yourself.Otherwise, you would find that collecting miles points are too hard and claiming them is even more complicated.
If you frequently shop at a particular store, then you can consider getting a shop reward credit card. These reward cards usually award rebate points from your purchases that you can only claim from selected merchants. Gas reward credit cards obviously are best for those who spend a lot on their gas and car maintenance expenses.
Cash-back credit cards are great because you earn points regardless of what type of purchase you make and wherever you want to use your credit card for. You can pay your utility bills, do your groceries, refuel your car- you still earn points any way. Cash-back reward credit cards are always a good choice because you can actually turn your points into cash and use them however you want.
When Reward Credit Cards Isn’t Rewarding at All
The problem comes when people spend more on their credit card rewards carelessly. They charge everything on their reward credit card just to collect as many points as they can in a given period. This will work if you can pay off your balance in full by the end of the month.
But experience proves that most people end up carrying over their balance for the next billing period. This means, they have to pay for a high interest rate which often costs more than the reward they worked so hard for. Remember, if you can’t pay off your balance in full, the high rate of interest will simply defeat your purpose of getting rewarded by your credit card.
Check out all the rates and costs that apply with your reward credit card. Is there an annual fee to activate your membership to the reward program? If yes, is it worth paying for just to earn the reward? Consider how much bonus you can get for the whole year and compare this to the cost of your annual fee.