Some Facts About Credit Card Rewards
When credit cards offer “rewards” to their cardholders, it is done in connection with the number of purchases the customer makes with the card.Some of the most popular rewards are air miles and discounts off the cost of flights offered by certain airlines, however, the variety of rewards that are available is nearly endless.Many stores and retailers also offer “loyalty” rewards if you are using a credit card issued in their name and some credit cards will give the opportunity to earn discounts on the purchase of a new car.
As desirable as these cards may seem to be, it is still necessary to question whether or not they are worth it.If you make a comparison of the interest charged on purchases made with the cards that have rewards and the ones that do not, you can answer this question easier.Even if there are many credit cards which offer rewards or loyalty bonuses, the lowest rate of interest on these cards is most often around 15% APR.This is about 7-8% more in interest than you would pay for a very basic, low-interest credit card and infinitely greater, of course, than you would be paying on the zero-percent rate of interest on the introductory offer with many other credit cards.When you examine the whole assortment of credit cards that offer rewards you will find that the interest rates on some will be well over 30% APR.
If your credit card is one of those that has these higher rates of interest and you are using it to earn enough points to get the types of rewards you want, it may be a better idea to switch to a lower interest credit card and save money instead of reward points.If you are the kind of credit card user who always tries to pay off the whole balance on the card before the payment is actually due, and who therefore never pays any interest, the rewards for using your card are genuinely free.Unless you are sure that you can pay off all of the total balance on your credit card every month, you may want to use an alternative such as the cash back credit card.The cash back credit card gives back cash to you according what has been spent on the card each month and the reward credit card also works on this principally in the same manner.
You will be paying an excessive amount for the use of a cash back credit card, if the amount you spend attracts the 19% APR in interest and the current best cash back rate is somewhere around 5 percent on the spent amount.If you have developed the habit of paying all of your outstanding balances each month to avoid paying interest, you can of course, put the 5% cash back into your own pocket.
It can certainly be worthwhile to you if you use the cash back credit cards and those that offer rewards if you keep paying your monthly outstanding balances consistently and avoid the interest that will be charged.If you use the cash back and rewards credit cards in this manner you can put cash into your own pocket and accumulate the necessary reward points to help you acquire a wanted or needed item.
