Determine What Perks Work Best for You
The type of perks offered by a credit card's rewards program can help you determine what credit card is right for you. The most popular rewards being offered are:
Airline miles: Rewards programs that offer airline miles are better suited towards those who frequently travel. Airline miles can be looked at as a sort of points system, where the miles can be redeemed for airline tickets, hotel accommodations and other expenditures related to travel. While miles can be earned through regular use of your credit card, certain purchases, like buying tickets through the airline that offers the card, offer added bonus miles.
Cash-back: If you aren't a frequent traveler, you may want to look into a credit card that offers a cash-back rewards program. These rewards programs are one of the most appealing because the rewards are flexible and can be used for almost anything, not just travel. Companies that offer cash-back rewards typically send the rewards in the form of gift certificates, account credit and even checks that can be redeemed for cash.
Reward points: Credit cards that offer rewards in the form of points are typically marketed towards loyal patrons of a certain business. For example, Amazon.com offers an Amazon Visa credit card that earns points that can be redeemed for purchases through Amazon.com. While this might not sound appealing to those who never shop at Amazon.com, those who frequently use the website would strongly consider signing up for this rewards cards for the special Amazon.com perks.
Once you've made a list of potential credit cards you'd like to sign up for, review the perks being offered to see which rewards program would benefit you the most.
Calculate How Rewards Are Earned
So you've decided that a cash-back rewards credit card sounds the most appealing, but now you have to calculate how your rewards are earned:
Airline miles: For most airline rewards credit cards, the most mileage can be earned when your credit card is used to purchase tickets from the airline sponsoring the card, and any hotels or car rental agencies that are partnered with it. Any other use of the card will typically earn you the minimum amount of miles being offered.
Cash-back: The way cash-back is earned varies depending upon the company offering the card. Some companies offer the most cash-back on certain purchases like gas or travel, while others have a rotating list of categories that can change on a monthly basis.
Reward points: Merchant offered credit cards will almost always offer the most reward points for purchases made through their business.
Remember to always get as much information about how rewards are earned for a specific rewards credit card. While most offer reward points, cash-back or mileage through just about every purchase, there are certain purchases that can earn you the most rewards.
Annual Fees
A rewards credit card's annual fee will help you decide if the benefits of a certain program outweigh the costs. In many cases, the credit cards with the most appealing rewards program are accompanied by an annual fee that can range from $50 to $100 per year. If the credit card you are signing up for says it has no annual fee, make sure you read the fine print. Often times, an annual fee is waived for the first year, but is automatically added to the first billing statement of the following year with no notification. So, before you submit your application, make sure you are fully aware if the credit card comes with or without an annual fee.
More Tips on Credit Card Rewards Programs
Find out if there is a limit to your rewards. For example, a rewards program can offer three-percent cash-back on gas purchases, up to $2,000 for one year. Gasoline purchases that exceed this limit are then calculated on a one-percent cash-back basis.
Check if there is an introductory APR and how long it lasts.
See if there is a limit on rewards earned per year.
Ask about additional perks. Some rewards credit cards include additional perks like free shipping on online purchases, club memberships and access to courtesy services like airport lounges.
Don't sign up for a rewards credit card just for a sign-in bonus, only to cancel it one the annual fee kicks in. Signing up for any type of perk or freebie when you have no intention of keeping the credit card will only hurt your credit score when you cancel.
Bottom Line
Before you get drawn into a rewards program with flashy perks, make sure owning a rewards credit card is right for you. Factors like your current debt, spending habits and your daily needs are things to consider before signing up for a credit card with a rewards program. Now, if you're pretty good about paying your credit card bills in full, and you can control your spending, credit card rewards programs are a great way to get something back for your regular, daily expenditures.
Source:
candofinance.com
