Guide to Credit Card Reward Programs

With the aim of wooing customers, many credit card companies offer rewards ranging from loyalty points to cash-back rebates. There are rewards to suit one’s lifestyle ranging from airline to movie tickets, discounts with selected merchants for goods and services and points that can be redeemed as in-store credits. A credit card rewards program can be used to good effect to enhance one’s life style at no cost. The following considerations can help in the selection process.

Rewards have a price: A good credit history is often a requirement to obtain a credit card with rewards. While the interest charged on such cards are higher than for those with no rewards, there is also an annual fee that is payable. Although there are “no fee” credit cards, they carry higher interest rates than the fee based ones. Since late payments and other charges can wipe out the rewards being offered, it is important to minimize such impact by making regular payments. Some credit card companies reserve the right to levy higher interest if the customer is in default with another creditor. As such it is best to understand the small print in the contract and the commitment required.

Understand how reward points work: If the card offers rewards for spending, check how many dollars have to be spent to earn one reward point. Some companies specify an expiry date for redemption of points or a limit to the points that can be accumulated for a set period. If so, is it possible to earn the desired number of points before the expiry date? Also, compared to the annual fee payable, is it worth it? Another factor worth checking is whether merchants with whom you shop are recognized by the credit card company. If the supermarket where you shop is not listed as a merchant with your card issuer, it would prevent you from accumulating reward points.

Know how cash-back rebates work: Credit card companies that offer cash-back rebates base their rewards on a percentage of the amount spent. Some companies cap the amount of cash-back rebates for a given period. While some issuers base the rebate on one rate, say 1 percent, of total spent per year, others offer a tiered reward system. In effect, the more one spends, higher is the rebate earned. A card offering one rate is better for someone with modest spending habits.

Check the process to redeem rewards: Redeeming the rewards attached to a credit card should be easy and hassle free. Ascertain how the process works, whether it means filling and mailing out forms or an on line method of choosing items and submitting for processing. Inquire how any disputes are resolved and how to get assistance.

In conclusion, your lifestyle and spending ability determine the rewards card that is right for you. Once that is done, the best way to maximize the resulting benefit is to use your card prudently. This means managing your credit facility with care. By doing so, you also enhance your credit rating.