Many of today’s credit cards offer rewards to their customers, such as cash back incentives, gift certificates, or frequent flier points, among others. These rewards are intended as a selling point for the card, encouraging customers to use them for purchases of all varieties. Generally speaking, credit card rewards are specifically awarded when the customer makes a certain type of purchase, uses a specific card-related service, or buys a particular item. Additionally, rewards may be granted when the customer uses the card for cash advances or balance transfers.
Since card types will vary, so will the rewards and related cost to the issuer, which typically runs somewhere from 0.25% and 2.0% overall. Major credit card networks, such as MasterCard and Visa, have chosen to increase their card user fees so as to provide issuers a revenue for rewards programs.
As a result of both the drop in the worldwide economy as well as the increased accruement of reward points, some card issuers actively attempt to discourage point redemptions through a variety of tactics. For example, some companies may require that cardholders call in to customer service prior to redemption. On some card issuer websites, although the accruement of reward points is a selling point, the feature regarding how to redeem them is well hidden. Others may encourage the customer to purchase a less expensive item with their reward points instead of the item they were hoping to purchase. Likewise, an expensive airline ticket, which could otherwise be purchased through airline reward programs, are exchanged instead for gift certificates when possible. Thankfully, these circumstances are more of the exception rather than the rule.
Rewards credit card programs typically offer either cash back incentives or rewards for making purchases. For example, one major credit card company offers customers the chance to earn 25% more airline miles, with a reward of 1.25 miles issued for every dollar they spend on purchases of any sort. So, if the customer spent $400 on purchases, which in today’s marketplace is very easy to do, then he or she would be rewarded with 500 airline miles. Another major card issuer gives customers back 1% on all purchases. If the customer were to spend $100, for example, they would receive a cash back incentive of $1.00 to their account. Numerous other programs, such as free hotel stays, gift certificates to major retailers, vacation packages, and even luxurious merchandise items, can all be earned through credit card rewards.
Most consumers today do have at least one credit card in their wallets. Additionally, credit cards and debit cards are used more than ever before for everyday purchases. By choosing a credit card with a low interest rate, great rewards programs, and a cash back incentive, customers can receive incentives for the activities they normally engage in! In fact, even a typical grocery store purchase will qualify for cash back and reward incentives with many credit card issuers!
When choosing a new credit card with reward incentive programs, there are a few areas to keep in mind. Choose a card that offers rewards that you can logically use. If you never travel to Las Vegas, nor plan to in the future, a Las Vegas vacation incentive may not be for you. Likewise, if you never fly, airline miles are also useless. If the rewards are issued for specific vendors, be certain that you can actually shop there. If the card provides cash back rewards be certain of how those rewards are issued, whether directly to your account or by check. Finally, consider all credit card fees and whether these fees will be offset by the rewards program.
Before making your final selection, be certain that you understand the reward program, any related restrictions, how rewards or points are accumulated, and how they can be redeemed.