Credit can be a wonderful thing if you use it right and it's even better when you get paid to use it, as in the case of cash back and reward credit cards. With these cards, you simply use your credit card to make purchases and get incentives in the form of reward points or cash back. These reward points can be used towards free or discounted products and services. With cash back credit cards, you can even (with most cards) donate your cash back to the charity of your choice! Other cards let you deposit your cash back into a savings account for a college fund this can be a great way to start your child's college fund, in fact.
Cash back and reward credit cards seem like a really great deal and if you're a skeptic like me, you're wondering what the catch is. The catch is most likely that you are paying higher interest on these cards in exchange for getting the cash back or reward points.
Cash Back Credit Cards:
A cash back credit card will generally pay you one to two percent cash back on your purchases. You'll get a check in the mail for the cash back your purchases have earned for you. You can spend this cash any way you like. "Cash", of course can take many forms. Discounts on goods like gas or furniture are commonly given as rewards for using these cash back and reward credit cards. Some cards will put the cash towards you balance, this can be used for purchases using your card.
Reward Cards:
Reward credit cards will award you points for purchases that you make, usually somewhere between one and five points per dollar spent. Be careful with these - some will only be redeemable at specific stores which partner with your credit card company, others will only give you reward points for shopping at these same stores; alternately, you might receive less pints for purchases made elsewhere. You will be able to redeem your points for items (usually a limited selection) form the locations which have partnered with them on the rewards program.
However, if the restrictions of the rewards program fit with your needs, there is a big plus to these programs - you will get a better deal in reward points than you will in cash back programs. Reward points are sometimes as high as five percent, compared with the one to two usually seen in cash back credit card programs.
Whether to choose a cash back or reward credit card is entirely up to you. If you use your credit card a lot, you can rack up rewards quickly; of course, this will only help you if you want the items which are covered by the rewards plan. Cash back can also add up, but will not do so at a very fast pace. Do your homework on the companies who offer these programs before making your decision. This way, you can get the cash back or reward credit card which meets your needs.
If you are one of the lucky customers who pays off their entire credit card balance in full each month, then interest rates will not be of much importance to you. You pay no interest as you never carry any balance over from month to month. What may be of more interest to you is the loyalty or reward schemes that various credit cards offer and therefore you should be deciding on which card to choose based on this information.
Pay an Annual Fee For Better Rewards?
Some credit cards charge an annual fee and they justify this by referring to the great reward schemes that they offer, but do your homework. It may be surprising to learn that many of the best reward schemes are from cards that do not charge any annual fee and in any case, you typically have to spend over five thousand pounds before the reward scheme will have paid you back your annual subscription fee. If you are being charged an annual fee for your credit card, compare and then consider switching credit card providers.
I Just Want Cash, Now!
There are generally two types of reward scheme. There are cash back schemes and points schemes. Cash back schemes are generally preferable as you are not limited in what you can get for your reward or where you have to spend it. If you are given back cash you can do whatever you like with it and don't have to spend it on a new toaster or other such gift that you can usually cash in your loyalty points for. As well as cash and points, you may also be rewarded with air miles or any other collectible reward.
Reward Points Credit Cards
As well as satisfying yourself that the reward is something that you can actually use, you should find out how much you are rewarded for using the card. Some reward schemes reward as much as 5% on all spending in the US, while in the UK the highest found rate was 2%. Others are closer to 0.4% rewards on all your spending. The difference, as you can clearly see, is substantial.
Maximising Your Gains
Loyalty rewards have been criticised by some consumer protection groups, as well as Which magazine on the grounds that they distract customers from getting the best deals on credit card interest rates and make them put up with worse terms in exchange for meaningless points.
Applying For a Credit Card That Suits You
There are so many good credit card deals on the market at the moment and there are probably as many, if not more, bad credit card offers. The trick is to find the best deal. If, as noted earlier in the article, you pay your balance in full every month them either rewards or a cash back credit card is a good option.
A cash back credit card application is relatively simple, find the deal with the highest cash back (based on your spending level) deduct costs such as annual fees and you have the potential ?cash back for that particular term. The next step in choosing a rewards credit card is to identify what type of rewards interest you, if you are an avid golfer then I suppose you will not be applying for a football card! Analyse the rewards, costs, spending and return of the card to find the best deal. This can be more time consuming than applying for the cash back offer, but there are rewards credit cards available that can be, if you pardon the pun, ?more rewarding? than others.
For most people a card with good terms and good interest rates is still more important than rewards and if this is the case for you, don't let the rewards put you off.
You freely reprint this article as long as the author bio and live links are left intact.
Both Nick Makaryk & 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.
Nick Makaryk has sinced written about articles on various topics from Credit Cards, Airline Credit Cards and Credit Cards. Nick Makaryk is an Internet Publisher, Copywriter, and Founder of A Free consumer Credit Card Comparison site helps consumer minded individuals find th. Nick Makaryk's top article generates over 60500 views. to your Favourites.
Joseph Kenny has sinced written about articles on various topics from Credit Cards, Debt Consolidation and Credit Cards. Joseph Kenny is the webmaster of , an online comparison site for UK residents. Joseph Kenny's top article generates over 550000 views. to your Favourites.