But which credit card reward is better? Points or cash back? Main contributors are the interest rate offered to card applicants based upon their credit scores, as well as the fine print regarding how to earn; and redeem, points and cash back.
When choosing a credit card rewards offer, decide what you desire most and which you can generate the most rewards. Since computing points is often confusing, many consumers choose a cash back credit card instead of a points card. With a cash back card, they know exactly how much money they will earn, and redemption is far easier. Even consumers who travel frequently will often prefer a cash back credit card instead of a points card for that very reason, plus because they have more flexibility on how; and where, to use the cash back. They don't have to worry about point blackout dates, nor restrictions to a specific airline or hotel.
Another problem consumers face when choosing a rewards card, are card fees and whether or not they will payoff balances in full each month. Otherwise, fees and interest could be more costly than the cash back and points accrued.
For consumers who do not frequently travel, and those who do not patronize a particular airline or hotel, Credit Federal suggests a cash back credit card versus a points card. Some airline miles cards are limited to a particular airline, and may have restricted travel dates. With cash back rewards, not only do you know exactly what amount your earnings will be per purchase, getting and spending your cash rewards is much easier and more flexible. You can view various credit card rewards offered by major issuers; including American Express, Chase, Citi, Discover, Visa and MasterCard at Credit Federal.
Consumers desiring reward credit cards also face the scrutiny of a credit check. Typically the greater the rewards offered, the higher the credit qualification. Bad credit people are considered a high risk and generally do not qualify.
Before you submit an application for a rewards credit card, consider these tips:
To maximize your rewards, payoff balances in full each month. If you cannot payoff balances in full monthly, select a card with the lowest possible interest rate.
Check for rewards caps to see if there are restrictions on the amount of points, etc, you can earn.
Find a rewards card with no annual fee. Otherwise, the fee you pay may be greater than the rewards if you do not use the card frequently enough, or not effectively.
Avoid cards with reward expiration dates.
Avoid short-term, introductory only card rewards.
Browse for perks. Some rewards cards offer free perks such as travel insurance.
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There are many credit card deals that are aimed at people with a lot of debt to manage. These deals offer 0% balance transfer rates and low long term interest rates to credit card customers. But people who pay off their balance in full every month do not gain a lot from those deals. Those people would be better off shopping around for a credit card that offers a reward. There are several reward schemes to choose from.
Cash Back Rewards
Cash back rewards are rewards where credit card customers get a cash rebate that is linked to the spending on the card. Usually this will be a percentage of the amount spent, anywhere from 0.5% or more depending on the card. Some cards offer a rebate of ?1 for every ?100 spent, others offer as much as ?3. This soon adds up. This is paid at different times. This can be an attractive reward for people who put large balances on their cards and clear them each month.
Earning Air Miles
Many credit cards also allow cardholders to earn air miles. Again this is linked to the spending on the card. Cardholders earn a specified number of points for every pound spent. These can then be applied to travel with major airlines. Some airlines, such as British Airways, BMI and others, have their own points schemes. Others use the international Air Miles program. Air Miles can also be used to qualify for other airline rewards such as upgrades to airport lounges and so on. Other types of travel rebates can also be earned.
Earning Points With A Credit Card
An alternative to cash back rewards is a point earning system. Each pound spent equates to a certain number of points. An example of a points scheme is the Nectar scheme, one of the largest in the UK. Like supermarket loyalty card points schemes, credit card points schemes allow cardholders to exchange their points for vouchers, cash or discounts on goods and services.
Other Rewards
Some cards allow customers to apply their points to other rewards. For example, the GM credit card allows you to save your cash back to apply to money off a car. Some credit cards allow members to use their points to book holidays, pay for flights and buy wine. And one credit card offers a concierge services, multi-trip travel insurance and executive lounge pass.
What To Watch Out For
Many of the reward cards have high interest rates compared with the 0% and low interest deals. This should not matter for people who clear their balances in full each month. However people who do not clear their balances in full but who still want to benefit from the rewards will need to be careful. Many cash back reward cards have a cap on how much cash back a cardholder can earn each year.
When choosing a reward card, look for the one that offers the highest reward or the one that will give rewards that are useful to you. Air miles are only useful if you go on holiday, while discount vouchers can be used in a range of stores, so you will easily find one that is useful for you.
Both Kenneth Wade & Joseph Kenny are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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