Rewards Cards: Are They Worth It?

Virtually all consumers will have a credit card at some point in their lives. Is this an understatement? Probably, as most consumers carry multiple credit cards. Selecting a credit card should not be something taken lightly; card companies are constantly looking for new consumers, but only after wisely comparing offers should you select a provider. Pick a company that will give to you a reasonable rate and one that incentivizes their program with some type of reward for using their card.

So, how do rewards cards work? Almost without fail, rewards cards typically give consumers money back on their purchases [usually 1-2%] or allow you to accumulate points toward prizes or discounts on future purchases. If you charge $10,000. per year [not hard to do if you charge your groceries] and your rewards card pays you a 2% reward on purchases, you will receive $200. from the company. Usually you will gain the funds in the form of several credits to your account spread out over the course of a year, but in some cases you will receive the rewards in the form of a check.

Rewards cards are free money, right? Only if you do not have to pay an annual fee and you pay your credit card off every month. If you do not pay your card off every month, your reward could easily be overshadowed by monthly interest payments, especially if your interest rate is high. Not too many companies pay rewards and give you a low rate at the same time. In theory, even if you carry balances for as little as 2-3 months before paying your card off you could find your rewards for the entire year outweighed by finance charges.

When rewards are given in the form of points that you later can redeem for prizes or take discounts on future purchases, you need to consider the following when selecting your card:

1. Is the reward program for something you know you will use? For example, if you are a member of GM's rewards program, are you certain that you will be purchasing a GM product in the future? If so, go with this card as the return can be as high as 5%.

2. Is there an annual cap on purchases? Many rewards cards will limit to you the amount of cash back funds or rewards points you can accumulate in one year. Most people never come close to the figure, but if you are a business traveler you can quickly approach and pass these limitations within the year.

3. Do points eventually drop off? The majority of rewards cards only allow you to accumulate points for three years before they begin to drop off. If your next car purchase is five years away and you have a program that drops off points, you could find the first two years of card usage to be a waste as those points would vanish. If you still want that particular rewards card, only use it in years 3, 4, and 5 so that when it comes time to purchase your new car you will not have lost any points. You could consider getting and using another rewards card for a different rewards system to cover years 1 and 2.

All in all, rewards cards can be a useful option for the savvy consumer. Remember, points do fall off and carrying balances from month to month will wipe out the value of the card in short order. By showing plenty of discipline you can make rewards cards work well for you.

Matt is a writer, web designer, and marketing manager based in North Carolina, USA. Matt writes on a variety of subjections related to business and travel. His primary website is for business flight attendants and can be found here: http://www.corporateflyer.net.

---

Credit Report ? How Your Credit Score is Determined

Most consumers are aware that they have something known as... Read More

Debit Card vs. Credit Card, What Are The Differences ?

Ah, the "good old days". If you are a baby... Read More

7 Surefire Ways To Repair Bad Credit

Do you have a poor credit rating? If so, you... Read More

Getting Your Credit Report and Understanding Whats On It

If you intend to apply for a loan, you need... Read More

Ethical Finance: Who Benefits From Our Spending?

On one hand consumers are being universally criticised for running... Read More

Credit Cards -- What You Should Know

There are a lot of questions about using credit cards.... Read More

Various Types of Credit Cards - Part 2

Several different types of credit cards offer several different options,... Read More

How Your Credit Rating Affects You, and How to Check It

You might not know it, but every time you take... Read More

Get Your Credit Score To Soar In The Twinkling of An Eye

Ever wonder how a creditor decides whether to grant you... Read More

Avoiding ID Theft and Credit Fraud

Article excerpted from the new book, "How to Do Space... Read More

Negotiating Rates with Your Credit Card Company

Ok, let's face it, everybody hates high credit card rates,... Read More

Free Credit Reports Now Available From the FTC

The Federal Trade Commission (FTC) has set up a new... Read More

Everything You Always Wanted To Know About Your Credit Report

Your credit report is a very powerful report that essential... Read More

Rebuild & Keep Good Credit Ratings by Understanding Your Credit Cards

Secured Credit Card is similar to a prepaid credit card... Read More

Top 5 Reasons To Check Your Credit Report Regularly

#1 Make sure mistakes aren't hurting your credit.Reviewing your credit... Read More

Useful Tips on Using Credit Cards

Here are some useful tips on using credit cards. Whether... Read More

Which Business Credit Cards with Reward are the Best?

Thinking of applying for a credit card with a reward... Read More

A Debt Mentality

While working through my own debt situation, and helping others... Read More

Sound Advice For First Time Credit Card Users

If you are just entering the world of credit cards,... Read More

Credit Repair Scam - How To Avoid Being A Statistic?

A good credit history is critically important for the consumer.... Read More

Watch Out For Credit Repairs

It is very easy to find a site that is... Read More

Credit Verus Debt

Secured and unsecured debt - what's the difference?It's easy to... Read More

Dont Fall for Credit Repair Scams

We've all seen the ads on television or in magazines,... Read More

Choosing the Right Credit Counseling Agency for You ? Some Tips Part 2

Credit counseling companies come in all shapes and sizes. Whether... Read More

Good Credit is King, When Qualifying for Mortgage Programs

If you want to purchase a new home or refinance... Read More

The Easy Way To Gain Access To Your Free Online Credit Report

When you apply for credit, those lending you the money... Read More

Bankruptcy Myths Busted

The average American knows very little about bankruptcy. Most people... Read More

Credit Repair Services vs. Do-It-Yourself Credit Repair

Millions of Americans suffer because of bad credit these days,... Read More

New Law Provides Free Annual Credit Report

As of Thursday, December 1, 2004, one-third of Americans will... Read More

Have You Ever Opened a Checking Account?

Maybe some of you are saving it in your trusty... Read More

Learning the Disturbing Facts about Credit Card Debt

When I received my first credit card in the mail... Read More

Finding the Right Credit Card

There are so many credit cards out there to choose... Read More

Credit Cards, Merchant Accounts, and Your Bottomline

Q: I'm opening a gift shop and want to be... Read More