understanding-credit-card-rewards

Understanding Credit Card Rewards Programs

Looking for a credit card that offers you incentives? Rewards cards work the same as traditional credit cards when it comes to charging for purchases and paying your monthly bill; however, they are laced with ways to get something in return when paying with plastic. Before you choose which types of rewards cards are best for you, learn more about your different options when it comes to rewards programs.

Rewards Card Incentives

Every credit card rewards program has its own set of rules, but the idea that you are rewarded for the purchases you make is consistent. Some rewards cards offer cash back, while others give you the opportunity to earn rewards points to redeem for airfare, gift cards, or even merchandise. Other credit cards with rewards offer coupons and retail store cash,  but regardless of the incentive, its important that you fully understand the parameters for earning and using the rewards before applying.

Traditional Rewards Credit Cards

Many major credit cards offer traditional rewards programs, allowing you to earn points based on purchases you make with your rewards card. Points can be accumulated and applied toward rewards such as products, gift cards, movie tickets, and entry into special drawings and contests. Be mindful of the fact that some rewards programs may require you to use your points within a limited amount of time, so take the rewards cards limitations into consideration when comparing rewards programs.

Gas and Retail Credit Card Rewards Programs

Certain businesses offer their own line of credit, using rewards as incentives to attract consumers to apply for a line of credit. Gas station credit card rewards programs offer cash back and rebates on gas purchases, while retail rewards programs dangle discounts and in-store credit. Although these types of credit cards with rewards seem sweet, they typically come with a high annual percentage rate, and may be best for those able to pay off their credit card debt in full each month.

Automobile and Airline Rewards Credit Cards

Auto manufacturers and airlines often team up with traditional credit card companies to offer credit card rewards programs focused on saving you money on your next flight or car purchase. These cards usually work anywhere the type of credit card is accepted, but earns you credit toward a lower APR or discounted — and sometimes free airfare and hotel accommodations.

It can be easy to get caught up in the incentives, but try not to let the rewards determine what purchases you put on your credit card. You may find that you are under more of a mountain of credit card debt rather than an avalanche of rewards, stuck with a high credit utilization ratio and a lower credit score.

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