Reward credit cards give benefit to encourage their customers for using the card more. They offer incentives for the amount of money you spend on the card. People earn more benefits based on the purchases they make using the card.
However, finding out the best reward credit cards can be overwhelming.
You will find many types of reward credit cards like cash rewards, miles, airline travel, points, and gift cards.
Don't know where to start? Here you go :
At first, you need to analyze your spending behavior to look at where you are spending most.
By doing so, you will understand where you can earn cash back rewards, rebates, discounts, miles or points.
For example, if you often travel and stay in certain hotel brands or fly with certain airlines, then taking out a travel reward credit card can be beneficial.
Similarly, a person, who often plans long road trip, should take out a gas credit card to get rewards.
Once you decide your spending behavior, you can apply for the best reward credit card to get the most benefit.
Know the different types of credit card rewards
Credit card rewards come in 3 forms like cash, points, or travel miles.
1. Cash rewards:
A cash reward is easy to use, but it doesn't always pay you in cash.
You can get cash back on your spending, and then you have to redeem the cash back as a statement credit, direct deposit to a bank account, and gift card.
Remember, some cash reward cards only allow you to redeem the cash reward as a credit to the bank account.
Some will send a check or make a deposit into the bank account when the customer wants to redeem the reward.
2. Point rewards
Point rewards are generally given based on each dollar a customer spends. For example, you can earn 1 point on spending 1 dollar.
You can redeem the points for gift cards, cash, or even branded gift cards and merchandise. You can also collect points to use them towards a rebate or cash off on purchases and hotel stay.
Make sure you check the expiration date within which you need to redeem your points.
Also, ask the credit card company to know how often you have to use the credit card to take advantage of the benefits.
3. Travel miles rewards
Airline or miles rewards credit cards offer you to redeem for free or discounted travel along with other attractive deals.
If you have a hotel credit card and you earn good points, then you can get free or discounted rewards at specific airlines.
Check out whether or not there are restrictions on travel, blackout dates or seat restrictions and an expiration date on the credit card rewards.
Advantages and disadvantages of reward Credit Cards
You can earn from your purchases by using different types of rewards credit cards.
However, it is important to understand that all these are business strategies to let you shop more and more.
Here are some advantages and disadvantages of reward credit cards that you should know.
Advantages of reward credit cards
1. You can earn from the purchases you make
Reward cards allow you to earn from your purchases.
From a cash back reward card, you can earn points for each dollar you spend using the card.
Thus, you will be able to redeem those points on your next purchase to get benefits.
2. You can get discounted price rates
You can get rebates on your purchases.
Every time you purchase a product, you will get a certain percentage amount that will be given back to your account.
You can use the rebates on your new purchases. You can also pay back your credit card balance using the rebates.
3. You can travel without paying anything
In a travel reward credit card, the points are equivalent to the mileage.
Once you collect enough mileage points, you can get free travel ticket from the credit card issuer's sponsor airline.
Similarly, you can get a free hotel stay with the help of a hotel reward credit card.
Disadvantages of reward credit cards
1. You need to pay high annual fee
Reward credit cards usually come with a high annual fee. However, some credit card issuers offer reward credit cards with less annual fee; they might offer a low annual fee to the customers who have good credit score.
2. You will get a high-interest rate
Most rewards credit cards come with a high-interest rate or variable rate of interest.
The rate you are paying today can become expensive tomorrow.
Thus, it is advisable to avoid reward credit cards that offer a low introductory rate at the beginning, but the rate increases once the introductory period expires.
Lastly, though you can get good benefit from the reward credit cards, yet you should not purchase things extravagantly.
Remember, some credit card companies promise to offer good points until the user reach the maximum amount allowed.
So, basically, the credit card issuers want you to spend more and more by offering those attractive deals.
Some credit card issuers even have hidden terms and conditions on reward credit cards.Therefore, it is advisable to understand the policy clearly before saying "yes" to a particular reward credit card.
Remember, no matter how exciting the offers are, you have to be confident enough whether or not you can repay your credit card balances within the stated time.
Otherwise, you will fall into painful credit card debts shortly.