What are the special features of reward credit cards?

Credit card rewards are incentives or points doled out by credit card companies when you use their credit card. It goes without saying that whenever you swipe your credit card it benefits the credit card company in two ways: one, they get a swipe fee from the merchant, and two, they charge you interest and other transaction fees. So, to make you use their credit card more often they dangle the rewards carrot. And most of us bite it.

Cards that give out such incentives are termed as rewards credit cards. Rewards are linked to spending, so if you're the type who carries a balance, then it is best not to go for such a card.

Types of rewards

Cash Rewards credit cards offered are of many types. Some cards offer travel points that are converted to a discount when you buy an airline ticket. Some offer points that can be redeemed at stores. Then there are cards that offer gasoline points that can save you cash when you gas up.

However, the most popular rewards credit card is the cash-back credit card, which is a card that gives you cash that's linked to what you have spent on your rewards credit card. You could search for the best csh back credit cards to obtain good deals on credit cards with rewards.

Factors to keep in mind before choosing a rewards credit card

Before going in for a best rewards credit card, keep in mind that these cards charge a higher rate of interest than non-rewards cards. Now, if you've decided that high interest is up your street, read the following:

If you carry a balance on your credit card then rewards credit cards are not for you. The logic is simple: the reward points you earn will most likely be lower than the amount of additional interest you will pay on your balance.

Read the terms carefully. Credit cards should specify the “full” percentage rebate (such as a full 1% rebate) rather than be vague about the rewards percentage.

There is a cost on rewards. A Best credit card rewards gives point that normally equals a cent when it comes to spending reward points, and so 10,000 points equal $ 100 in currency. Remember, when you redeeming 10,000 points for something that is around $ 40, it's just not worth it. You got to look at something that's close to $ 100. While earning reward points remember that spending $ 1 will earn you 1 reward point.

Determine your spending profile and the figure out what type of rewards will work best for you. For example, if you charge your card most of the time, then go in for a credit card that rewards you with air miles. However, if you don't load your card with much, look for cards that convert smallish reward points into goodies. That way you'll spend your points frequently and feel satisfied too.

Given the current spike in gas prices, gasoline cards are getting more popular as these offer as much as (up to) 5% in gas points. Just remember to redeem your points at traditional gas stations and not at clubs or supermarkets, where the discount will be lesser.

Look for annual fees. If a rewards credit card is charging annual fees of even as low as $ 25, then that means you are straightaway sacrificing 2500 rewards points; to get back these points you will have to charge $ 2500 on your credit cards. Avoid rewards credit cards with annual fees.

Look for caps on earnings. For example, a company may limit the amount of rewards you can earn in a year to $ 250. This means that once you make 25,000 reward points in a year you won't be eligible for any more.

Rewards credit cards may adrenalize you enough to apply for one. But the bottom line is their affordability. If you cannot afford their high interest regime and feel you will not be able to cope up with your repayments, then it is best to stick to a low-interest, non-rewards credit card.

Get the best out of your rewards credit card

Many consumer groups criticize rewards credit cards because they succeed in diverting a customer's attention from their high interest rates. But if you regularly pay up your credit card bills in full and on time, you can maximize the benefits offered by such credit cards.

Serious regular credit card customers are already whooping it up by making their rewards credit cards contribute to a retirement account, get airline tickets for cheap, and get their next car at a discounted price. They are converting their miles earned into hotel stays and then adding more incentive points on such hotel stays. Some of them are converting these points for designer vacations too.

Cardholders who believe in the “cash is king” principle are demanding their cash back and they're getting it too. No questions asked.

To sum up, rewards credit cards are both good and evil depending on how you use them. Good, if used judiciously. Evil, otherwise.

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