Tough competition in the market among different credit card issuers force these companies to come up with their own strategies in attracting more customers to sign up for them credit card. The emergence of rewards credit card in a variety of categories and features can be a bit confusing for potential card holders.
As a customer, bear in mind that not all credit card issuers are genuinely seeking the card holder's benefit. Although, some rewards credit card can really work to your advantage, some credit card companies seek their own advantage and only use reward programs as a means to cover up unreasonable terms and mainly to entice their card holder to spend more on their credit card.
Let's discuss some of the things that should be avoided when searching for the right rewards credit card:
High Annual Fee Rewards Credit Cards
Stay away from reward credit cards that have an expensive annual fee. Think about it. If you're going to get 1% for every dollar spent on your purchases, then you'll only get a $50 reward for a $5,000 purchase. If you need to pay an annual fee of $50 every year just to get your $50 reward, do you think it's worth it?
Always calculate the exact possible amount of rewards you can earn and compare it with the payment you would need to pay each year to renew you credit card membership. There are rewards credit card that comes without an annual fee and offers the same point systems. Don't easily get attracted to the key features that a particular reward credit card advertisers. Instead, read the full terms and conditions to get better view of the exact incentives you can get.
High Interest Rewards Credit Cards
Watch out for reward credit cards with a high APR and at the same has a variable rate of interest. Always remember, that you'll be charge with interest each time you fail to pay off your monthly credit card balance on time. If this is the case, you might end up paying for very expensive credit card bills which does not even come close to the little amount of rewards you earn.
Furthermore, variable interest rates rely on the Prime Rate. Thus, when the Prime Rate increases, your APR can also dramatically change from a reasonable rate to a very expensive one. Take note that variable APR also comes with a minimum cap which means even if the Prime Rate falls, your APR will not go below the appointed minimum cap.
Rewards Credit Cards with Blackout Dates
Some reward credit cards impose a blackout date on collecting points as well as redeeming points. If this is the case, you can end up wasting all the points you've already earned just because you did not gather the minimum points that will qualify you for a reward. Also, be careful about the terms on redeeming the points you've earned. For instance, some credit card forfeit reward points if the card holder has an outstanding balance on his account. If you don't understand the terms very clearly, you can lose your rewards without even realizing it.
