As the credit card companies work harder to compete for consumer business, they are attempting to offer benefits that appeal to a broad range of borrowers. Some companies use promotional rates or transfer specials to entice card switching. Other card companies have turned to reward programs appeal to the needs to some borrowers.
Reward programs are designed to encourage card owners to make use of their credit cards by rewarding users for amounts used or specific types of purchases. Programs are designed in a variety of ways. Some are set up on a point basis, where users are rewarded with points based on the amount of credit used or specific products purchased. Other cards offer cash back incentives. For instance, a card may reward the card holder with a 1.5 per cent cash back bonus for each purchase made with the card.
Consumers need to consider their intent of use before agreeing to acquire a credit card. Most card companies offer a portfolio of products. Some products use promotional rates and specials to entice consumers, others use the rewards or incentive programs, others offer grace periods as a way to appeal to borrowers who want to avoid high interest charges. While borrowers with excellent credit may find a card that offers all these benefits, some people may have to pick the products that are most advantageous based on the highlighted benefits.
Points based rewards programs, or those that offer cash back rebates, are essentially intended to promote more use of the card. Credit card companies make money from retailers with transaction fees. By rewarding consumers for using their card, the card companies also generate revenue from the retailer transactions. This enhances the card company's sources of income.
Other card reward programs involve retail networks and special bonuses for buying from specific companies or buying specific products. Card companies sometimes negotiate with certain retail chains in order to set up a mutually beneficial network for consumers. The card companies promote special bonuses or rewards for consumers who buy from retailers within the card network. For instance, a typical 1 or 1.5 per cent cash back program may offer a 5 per cent reward for buying from a network retailer. This rewards the consumer, and also benefits the retailer due to increased demand, and the card provider because of the consumer interest charges and retailer transaction costs.
So are reward programs worth having? If you're a regular card user then you can certainly profit from what you'd be spending in any case, but be sure that the benefits aren't drowned out by interest charges on your borrowing.
All credit card companies will provide you with an emergency number to call if your card is lost or stolen and in the vast majority of cases, any loss that is incurred by your account will be fully refunded by the card provider. This will always be the case unless you are somehow involved or to blame for the fraud, such as by giving out your security details to someone you shouldn't have trusted. This means that even if your cards and information are stolen, you generally have nothing to worry about so long as you report the incident. Replacement cards can be sent to you very quickly.
Another benefit of credit cards over cash is that you can use them with ease abroad. They are fast becoming an internationally recognised currency. While cash will be accepted everywhere within your own country, credit cards are accepted at a huge number of locations all over the world. As soon as you step off a plane, and especially if you are travelling through a number of countries, a credit card will be an invaluable means of payment everywhere you go.
Another huge benefit of credit cards, that is really only beginning to show itself with the growth of Internet shopping, is the ease with which payments can be arranged online. There are thousands of websites now, all over the world that will conduct business with you and give you access to great prices if you have a credit card to pay for it. Gone are the days when cheques would be mailed in the post. Now, with new payment systems such as pay pal, even individuals can accept credit card payments with great ease and for very little expense. You should take care with your personal information and payment details however, and conduct business either via an intermediary such as pay pal, or only with companies you know you can trust.
The disadvantage of credit cards is that they can cost you money. You pay interest on balances that you carry from one month to another and if you do use your credit card abroad, you will have to accept additional charges from your card provider.
Both Michael D. Strauss & 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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