Comparing Credit Card Rewards Programs

Credit card rewards programs are great in that they reward you for credit card use. However, there are two important things you should know: (1) you should never pay for a card (via annual fees or a higher interest rate) simply because the credit card offers a rewards program; and (2) you should not charge more purchases or spend more money than you normally would simply because the credit card has a rewards program. If you can avoid these two common mistakes, your rewards card should by a nice addition to your credit card repertoire.

There are many different rewards cards from which to choose. Some rewards cards offer airline miles that you can redeem for airline travel, some rewards cards offer points that can be redeemed for anything from the latest electronic gadget to a ski resort vacation, and still other rewards credit cards offer cash back bonuses. Your individual tastes and needs should be the determining factors when deciding which rewards credit card you should obtain. However, before you make your decision, there are some things you should know.

If you want a travel rewards card, make sure that there are no blackout dates for travel and that the miles never expire. Additionally, make sure that the miles that you accumulate can be used for an airline that you actually use. It does not help your situation if your miles can be redeemed only on some unknown airline company.

In regards to rewards cards that offer strictly points that can be redeemed for a whole catalog of things, you have to again make sure that you would actually use your accumulated points on their merchandise. It does not make for a good rewards card if all you can redeem your rewards points for is an outdated clock radio. Also, as with the travel rewards card, make sure that your points never expire.

Of all the rewards programs available, many people choose the cash back rewards cards. I understand the appeal of getting cash back from your normal credit card use, but usually the cash back percentage is so small (usually one percent (1%) of your total purchases) that you have to spend a very large sum of money to actually receive something other than a nominal amount back. As such, I am not a big fan of cash back rewards programs. However, if you are a "big spender," a cash back program may be the right option for you.

The point is, use this information to decide which rewards program credit card you would like to pursue and do so by finding the best credit card that offers the rewards program that you want.

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.”

What are Platinum Credit Cards?

Traditionally, credit card companies have levels for their credit cards if they offer more than one card. Usually, the credit card company has a base card. There is usually no color scheme attached to this card and it usually has the worst interest rate and credit limit. As you use that card and establish a good credit score, the company many offer you its gold card. This is the next level in the credit hierarchy. This card usually has a better credit limit and a lower interest rate. Additionally, this gold card probably comes with benefits like concierge service, roadside assistance, rewards points, or some other incentive. Eventually, you may be offered the platinum card. This card is usually the flagship card for the company. It will have the best interest rate and the best credit limit. In addition, it will have the best incentive and benefits package. Some companies offer a card that is “higher” than a platinum card. These cards are super exclusive and are very hard to obtain.

You need to beware of these gold and platinum cards. Sometimes, they are better by way of lower interest rate and higher credit limit. However, many times credit card companies will throw in annual fees on these “higher” cards. I am a firm believer that there is no reason for an annual fee, therefore, unless some amazing benefit is offered by the card, you should be wary of this fact.

Another thing you need to be cautious of is that credit card companies use the terms “gold card” and “platinum card” as marketing terms. Basically, you think you are getting something special, but it ends up being a terrible card in a shiny, attractive color. Do not be fooled by these marketing techniques. Always take a look at the credit card’s interest rate, fees, credit limit, and rewards options before you make any decision. Think about it like this: would you rather have a blue card that has a 9.9% interest rate, no annual fees, a credit limit of $5,000, and rewards points or a platinum card that has a 12.9% interest rate, a $50 annual fee, a $5,000 credit limit, and rewards points? To me, this is a no-brainer. I say, keep your platinum card if it is worse than my regular card. The point is, do not be deceived by marketing. Get the card that is best for your situation.

In a traditional sense, platinum cards can be a better card to possess and usually has to be earned, however, beware of marketing tricks and annual fees that tarnish the attractiveness of a platinum card.

Rewards Cards?

Rewards programs are supplements to credit cards and should not be the primary reason as to why you get the card. In my opinion, the best reason to get a card is a low interest rate (and of course no annual fee, because there is absolutely no reason to have a card with an annual fee).

Look carefully at rewards card advertising. Many commercials state that you can get cash back from using your credit card. The commercials go on to show a person stating that they got $100, $200, or more back due to his/her “cash back” rewards card. These commercials are not telling you the whole story. Do not get me wrong, it is very possible get this amount back, but you have to charge upwards of $10,000 to get it. That is not a typo, $10,000 to get $100. That is 1%! Is it really worth it to apply for a card that offers 1% cash back, but has a higher interest rate than other cards? I do not think so either.

Also, make sure that the rewards card you want actually offers rewards that you want. Almost all credit card companies offer some kind of shopping mall in which you can redeem your rewards points. What if you do not like or need any of the merchandise in these credit card malls? What you end up with is a bunch of reward points that you will never use or, if you redeem your points, you will end up with a piece of merchandise that you do not want.

The point is, do not be awe struck by a credit card solely because it offers rewards. Get a credit card that has no annual fee and has a low, fixed interest rate. If you find a couple of credit cards that meet these criteria, then you can choose based on rewards. Just make sure you look into the rewards first so that you are not stuck with a 1% cash back rewards card or a point redemption mall full of unusable and unwanted merchandise.

How to Profit by Using Credit Cards to Pay Bills

You pay your bills month after month. Your either write a check and mail the payment, or (if your are technologically savvy) you make the payment online using your bank’s bill pay service. Paying bills with cash can actually cost you more money than just the cost of the bills. As you pay bills, your checking account balance is gradually reduced. Therefore, if you have an interest bearing account, you are losing the interest on those dollars. However, there is a solution that could not only take away this disadvantage, but could possibly reward you in three ways. The solution is to pay your bills with your credit card.

I know what you are thinking, “Why would I pay with a credit card? A credit card must also be paid, so what is the point?” The point is that you could be rewarded for paying things with your credit card. First, if you have a rewards card, you will earn points for the amount you charge. Rewards points are redeemable for cash, airline travel, and other merchandise.

Second, by the continuous use and timely payment of your credit card, you will be building a strong credit report and thus, building a strong credit score. A good credit score will save you tons of money in interest and will help you get approved for loans.

Last, you do not lose as much interest from your interest bearing account (assuming you have one) because the money stays in your account longer. Additionally, when you do pay your credit card, only that one sum comes out at that one time. Therefore, you do not gradually decrease your checking account. Additionally, paying the bills in a lump payment (by using your credit card and then paying off your credit card) will help you get an accurate number on your monthly expenses.

It is important to note that in order for you to realize these benefits, you must pay off your credit card balance in full every month. If you do not pay off the bill in full, you will incur interest and the whole reason to use the credit cards (to get the interest free benefits of reward points, a strong credit report and credit score, and more interest from your interest bearing account) will be frustrated.