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11/8/07

Credit Card Rebate Programs: Are They Worth It?

Of all the credit card rewards programs that are offered, cash back rewards cards are my least favorite. Many credit card companies offer many different types of rewards programs. The most common rewards programs are cash back, airline miles, and rewards points. Each card is different, and thus, you must carefully check the terms and conditions of each credit card so that a fancy rewards program does not blind you from a high interest rate and/or high fees.

Usually, when a card offers cash back rewards, the cash back reward is one percent (1%) of the amount you charge. Therefore, for every $1,000 you charge to your credit card, you will get a $1 reward. Is that really a reward? Think about it like this, in order for you to earn $1,000 worth of cash back rewards, you would have to charge $100,000. If a person is charging $100,000 to a credit card, do you really think that $1,000 is significant to that person? I do not think so either, therefore, I generally avoid cash back reward cards.

As I mentioned above, my favorite kind of reward card is a points card. I like the variety of options on which you can redeem your points. Additionally, some credit card companies offer “double points” or point bonuses on specific purchases (such a gasoline).

Regardless of the reward you choose, you must be aware of what you are giving back to the credit card company in order to obtain this reward. For example, if your rewards card requires an annual fee, do not get the card. Additionally, many rewards cards have a high interest rate. The point is, make sure that the rewards credit card is acceptable under regular credit card standards (this means a low, fixed interest rate and no annual fees) before deciding to obtain that rewards card.

Cash back rewards cards are not worth the effort, therefore, look for a rewards card with more benefits and better options. However, make sure that you are not sacrificing suitable credit card requirements in order to get a “rewards card.”

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