Rewards Credit Cards - The Ultimate Guide to Get the Best Reward!
Rewards credit cards are credit cards that offer you rebates, points, and other awards each time you use them. If you have the right spending habits then this may be the right credit card for you. You may end up with some savings and some perks with this type of credit card.
However, do take note that this kind of credit card is not for everybody. Find out about the details about this card, its pros and cons, and other important tips in this section.
Top 4 Reward Credit Cards
Advantages and Disadvantages of Credit Cards with Rewards
These credit cards have their own set of pros and cons. It should be common knowledge by now that there is no such thing as a one size fits all kind of card. Consider the benefits and downsides of this type of credit card before you sign up for one.
Opportunity to Earn from Your Very Own Purchases: Some have complained about not getting paid to shop. Whenever you go shopping, the store owners and retailers are the ones who are making money.
The tables are turned when it comes to rewards credit cards. The more you shop the more chances you have of getting paid. It’s not that you were hired to shop. It’s actually more like you get a percentage of your shopping money returned to you in the form of a rebate.
An example of a credit card with rewards that give you back your shopping money is a cash back credit card. Of course the cash returned to you is only one form of reward for using your credit card on a regular basis.
Your points accumulate over time (and usually at a higher rate than getting a cash back). Now, the points you are able to accumulate can be converted to mileage. Note that there is a minimum amount of mileage points required before you can use it to travel for free. Most of the time you will get a free ticket from the sponsoring airline company when you hit the minimum amount of miles.
Exclusive privileges: Credit card companies collaborate with shops, boutiques, special service businesses, and others to provide exclusive services or products to credit card holders. For example, some credit card issuers work with insurance companies to make special travel insurance packages that aren’t offered to others who do not hold the same type of credit card.
Higher annual fees: along with the privileges that come with these credit cards with rewards come higher annual fees. However, the good news is that there are credit cards of this type that waive the annual fee – better take the time to look for them.
Higher variable interest rates: other than the usually expensive annual fee, the regular rates when you purchase items with this card can be pretty hefty as well. A lot of credit cards that come with a reward system have variable interest rates. That means the current rates you now enjoy can go up next month. There are rewards cards that have very low introductory rates – however, those rates rise pretty high after the promo period expires.
There are limitations imposed on rewards: another thing that you should pay attention to are the limits imposed on the rewards package or program. These limits are often applied to the redemption process as well as in the point collections side.
For instance, there are credit cards that give you a lot of points per purchases, which can help you accumulate points really fast. However, there is a minimum amount imposed and when you reach that amount you go back to the usual rate.
Here’s another example – some rewards credit cards offer you a 5% rebate for every amount you spend. However, there is a limit. Once you reach a certain amount in rebates, say $500 or $1,000, you will then return to the normal flat rates (which are usually around 1%) – sometimes no points will be given (which is why you have to read the fine print.
Another limit that is set for credit cards that have a rewards program is the forfeiture of accumulated points. Most of the time, at the end of the year, if there are any points that you have not spent or used then they will be forfeited. Points are seldom carried over.
Note that these limits aren’t included in the offer announcement. You’ll get pumped up and excited by the rewards program. However, these terms are stated on the fine print, which people rarely take the time to read.
The Issue with Your Credit Card Balance
Here is an important point that you should remember about credit cards with rewards. It doesn’t matter what sort of rewards program they come with. It also doesn’t matter which bank the card comes from. It also doesn’t matter what type of card you have if you have any balances on your credit card.
A lot of people tend to carry balances on their credit card and when you do you basically take away the value of any rewards program that may be included with the credit card you are using. This rule applies even if you are using one of the good rewards credit cards.
Let’s look take a look at the details shall we? It’s actually all about the interest that you will get that drowns out any benefit that you can get out of a rewards program. Note that many rewards cards have a pretty high APR.
Sure a credit card that has no rewards program with it doesn’t have a lot of perks. However, check its APR – they’re usually around 7% and sometimes less. On the other hand, rewards credit cards usually carry really high APRs like 14% and above.
If you carry a balance from month to month with an APR like that, your rebates won’t be able to scratch a dent on the amount you need to pay for. So, best advice here is to pay your premiums each month in full.
Useful Tips for Rewards Credit Cards
In this part we will include a few useful tips on how to use rewards credit cards. If you don’t know how to make the best of this card, then you may be losing out by the end of the month (or year, whichever is the case). Check out the tips below and follow the best advice.
Tip#1 – Always Conduct an Award Card Audit
You should evaluate the awards program of your current credit cards either bi-annually (twice a year) or annually (at the end of the year). Why do you want to do that? It’s simple. Rates change each year. You have inflation working against your money.
That should be reason enough but here is a topnotch reason: the rewards eventually become obsolete given the current trends.
Yes, check out the credit cards you are using. Do you have one that has been around for about 5 or more years? If you do, check out the perks that the program offers – whether it is a rewards card or not, do this.
Check out if the rates have improved or if they have gotten worse. Check out the perks and rewards earning plus the redemption rates offered by that card’s rewards program. How much are you actually getting by the end of the year?
After that, compare rewards credit cards and figure out which one actually offers you better options. Chances are that the newer cards offer better rewards rates and better benefits when you redeem your points.
Remember that you should be doing this annually or semi-annually. That also means you should be reading the credit card offers you are getting through the mail. Find out which new offers are out there and if they can give you at least $100 or $200 in savings for that card.
Tip #2 – You Really Don’t Have to Go After Every Reward
You don’t have to go after the rewards if the payments you are supposed to make are killing your budget. You’re not living life to the fullest that way. But that is not the only issue.
Some folks think that they are making a great headway when they spend like $5,000 on their credit card each month, which eventually earns them around $500 or so due to rewards and other perks. If that $500 award is costing you $1,000 worth in interest then the math tells it all.
This is especially true if you are carrying over interest from the previous month. You’re not saving money – you’re actually digging yourself into a hole. The best thing you can do is work out on paying the entire bill this month so that you can start clean earning rewards and rebates next month.
Tip #3 – How Much Do You Get Per Point?
This tip is all about assessing the value you are getting from each point you earn from your rewards card. Compute how many points you are earning each month from your credit card usage.
Some credit card companies have a tool on their website (or on their app) to check how many points you have already accumulated to date. After checking, you should figure out what rewards you can get with the amount of points you already have.
You should also investigate and check out how much those perks are really worth. You see a weekend vacation offer on their rewards list? Find out how many points it is worth and how much does it cost if you have to pay for it.
If it will take you like forever to accumulate the amount of points to get the rewards you like then you should compare rewards credit cards to see if there are other cards that give you more value per point.
Some credit cards are so bad that they only offer you less than a penny per point. That’s just not worth it. Never redeem items for your points that aren’t really valuable.
If you’re getting 5 cents out of each point then that is already a decent rate. If you’re getting less then you’re better off using a cash back card that will actually offer you more value for your money.
Tip #4 – Always Redeem the Rewards that Give You the Best Value
Let’s say you have accumulated about 50,000 points. So, which reward will you take? That may be enough to buy you a new iPhone or something else. That may already sound like a treat.
However, did you take the time to see what other perks you can exchange for your well-deserved points? Some credit card awards will give you a business class flight with the same amount of points. If you travel a lot then that should be a more valuable deal.
Tip #5 – Match Your Spending with the Reward Card You’re Using
Some rewards credit cards give you more points for certain purchases. Let’s say one card pays you more points on gas while another one offers you better perks for your grocery shopping. Another credit card may even give you more reward when you use it to pay for food you ordered in a restaurant.
Remember which card you should be using for each type of purchase you are making. That way you accumulate more points faster. Now here’s another trick, find out if you can transfer the points from one of your credit cards to the other – say you have 2 Master cards or 2 Amex cards. That way you can transfer points from one Amex to the other Amex and rack up points faster.
Tip #6 – Don’t Let the Annual Fee Bog You
Some folks get discouraged about using a reward card or two just because they have a huge annual fee. Well, if you can find a credit card that has a great rewards package with no annual fee then great.
However, if you can’t find one then get one that has an annual fee but allows you to stack up on rewards. That should be a great trade off. If the value of the rewards outweighs the cost of the annual fee then go for it.
Tip #7 – Diversify Your Options
People nowadays carry more than two credit cards, whether they have a rewards package or not. If you have different credit cards in your wallet make sure that you have cards from different brands.
Why do that? By doing so, you can maximize the rewards you can get from each card. You are also getting the most flexibility out of them. Long story short, you’re getting the best from both worlds.
Check out the perks from American Express cards and compare them to let’s say Visa Signature cards. Of course you can compare rewards credit cards of other brands too.
Notice that their perks vary. Do you want to take advantage of all the best offers from all these credit card issuers? Then get them all and just use all their best offers.
Tip #8 – Get Double the Sign Up Bonus
You see a new credit card with a slick sign up bonus in the mail – some of them even offer $200 worth if you sign up within the week. Why not make it a $400 dollar sign up bonus? How, you may ask.
Here’s how. Sign up for that card, quick. Now get your spouse, have him sign up for one too. To make the most of that, when you get those cards, hide them somewhere and don’t use them for now. That way you won’t get tempted to use them for some crazy impulsive purchase. Use them only when there’s a perk that’s worth getting.
Tip #9 – Use Your Billing Cycle Wisely
If you made it a habit to pay your credit card bills in full, then that’s great. You are actually getting a free loan from the bank each month for doing that. Do you want to know how to make things better?
When do you do your shopping? At the end of your billing cycle? Wrong.
Do it the day after your billing cycle. Why? If you do your last minute shopping at the last day of your billing cycle then you can be sure that in 20 or up to 25 days you will have to cough up the cash to pay for that cost.
However, if you make your purchases at the end of that billing cycle, you’re adding an extra 30 days to your usually 25 day pay period – you’re going to have to pay for that purchase 55 days later (about 2 billing cycles). With good budgeting skills you can set aside small amounts to pay for that cost, which should be easier on your wallet than paying for the full amount in the next 25 days.