The Reward Card Files
Travel, Gas, Auto, Cash, Shopping…Which Rewards Credit Card is Right for You?
You can’t get through a day without a credit card company calling to tell you about their “newest rewards program”!
Rewards credit cards offer points towards certain perks for using the credit card. For instance travel rewards credit cards, or air miles, give a consumer one travel mile for every $1 spent at participating retailers. You might not believe offers of fee travel, gas, money towards cars, shopping and cold hard cash could sway someone to sign with a certain credit card company, but studies done by Consumer Reports show that rewards programs actually affect the credit card decision making process quite a bit. Studies also show that rewards programs can make a person chose to use one credit card over another, despite the higher interest rates on reward credit cards; compared to non-rewards type credit cards.
That’s exactly why credit card companies offer a selection of rewards programs – they want to appeal to everyone. However it makes sense that just because a shopping rewards card would appeal to your college-aged daughter, it might not appeal to dad. No you might have your eye on the automobile rewards card, the one that gives you points towards that new Jeep Wrangler that you’ve been drooling over. With that in mind, credit card companies are offering rewards programs that are beneficial and desirable to everyone.
However despite the fact that we choose our credit cards based on the rewards programs that relate to us the best. And despite the fact that we rush to charge things on that travel credit card for air miles (as we mentioned in our travel rewards article) the majority of folks who own them never actually cash in their travel miles to purchase a plane ticket, therefore making the credit card virtually worthless.
So why do people continue to be tempted to sign up for travel rewards credit cards –despite the fact that they rarely redeem their rewards? Could it be that they don’t understand how to use them?
We think so! In fact we think it’s quite unfair that credit card companies are luring you in with the promise of free rewards without ever explaining the program fully. That’s why this article is bent and determined to fill you in on all the ins and outs of rewards credit cards, the types of rewards programs available to you, and the pros and cons of signing up for a rewards program. If, at the end of this article, you still go out an sign up for a rewards credit program, we want to make sure that you understand what you’re signing up for, and that you redeem those points!
First let us explore the different rewards programs available to you as a card holder. After all, if you hate to fly it wouldn’t make sense for you to sign up for an air miles rewards credit card now would it? So let’s get you on track to accumulating the right points.
Cash-back rewards programs – Who can resist the offer of cold hard cash? To take advantage of this rewards program all you need is an internet connection, a computer and a cash rewards credit card. Simply register your cash rewards card online and redeem points for cash back. Your cash is deposited into a savings account online, and many don’t offer cash at all, but rather coupons towards merchandise, gas or food. However many clients are unaware that cash-back credit card programs must mail you out a cash rebate if you reach the minimum amount for payout. See, it’s worth reading the fine print on your credit card agreement.
Shopping rewards cards – Register your shopping rewards card online and redeem points for coupons that you use at participating retailers. You just need a printer in order to print out copies of the coupons. The only catch is that many shopping credit card programs only allow you to use the coupons when you charge purchases onto your shopping credit card – sneaky huh? They also make it really easy for you to redeem your points through online merchants, but again you have to use your registered shopping credit card to make the purchases.
Air travel rewards credit cards - Air miles credit card programs let the cardholder earn 1 free travel with every dollar spent. Also called frequent flyer miles, these rewards cards are only really beneficial to those who fly regularly, or for those planning a yearly trip regardless of the points redeemed on their credit card. The main disadvantage of air miles credit cards is that they charge an annual fee of approximately $50, unlike most of the other rewards programs. However the annual fee might be worth it to you if you’re the type of credit card user who travels frequently, and pays off the balance of his or her credit card at the end of every month. Keep in mind that typically one travel mile is equivalent to 1.5 cents, but if you are the type of person that charges everything on their credit card each month (roughly $2,000 to $3000) and then pays it off at month’s end – you could very well be wracking up the air miles. If this sounds like your credit card behavior that a $50 annual credit card fee would be well worth it, keeping in mind that at 1.5 cents per mile, you would need to spend roughly $3,200 to earn enough air miles to pay off the $50 annual fee.
Auto rewards programs – These credit card programs partner with large auto manufacturers – GM, Ford, Toyota – in order to offer rewards towards a new automobile with every dollar you spend. This is really a win-win situation for the auto makers and the credit card companies – because the auto makers get the free advertising and the credit card companies get to use the incentive of free automobiles to draw in potential customers. If you are one of those potential customers, you need to ask yourself if you’re the type of person who purchases a new car every year. This is a valid question because oftentimes the points need to be redeemed on this card on a yearly basis. If not, you will loose your points at the end of each year and start again at zero. However if you have your mind set to buy a new car every year anyway, and your credit habits are typically that you charge all of your purchases, groceries, utilities and maybe even your mortgage payment on your credit card and pay off the full balance each month, a automobile rewards card may be worth the points you will collect towards that new car you would have purchased with or without the credit card.
Gas rewards cards – The offer of free gas with the prices soaring as they have been is very tempting. Everyone that drives a car could benefit from free gas, yet most of us have gas station rewards points and yet never redeem them for actual gasoline in our tanks. Gas credit cards don’t charge annual fees, and they give you points towards free gasoline every time you make a purchase at a gas station using your credit card. The downside of gas credit programs is that they carry very high interest rates, so we can’t stress enough that if you use it to fill up – pay it off when the bill comes. The great thing about gas rewards credit cards is that they are easy to be approved for – a great bonus if you have a bad credit rating or are trying to rebuild your credit rating after a bankruptcy claim.
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