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Choosing A Credit Card Rewards Program

Choosing A Credit Card Rewards Program credit cards With so many types of credit cards offering different rewards, sometimes it becomes extremely difficult for customers to figure out which one is the best. Currently, the two highly popular credit card rewards programs are reward points and cash back. “When you opt for a credit card offering reward or cash back scheme, it means you have an opportunity to achieve higher discounts,” said Anna Cohn of BestCredit.net. “You are also allowed to donate any points which you earn from these credit cards to any school or charity, which is another nice offering.” Additionally, most of the credit card companies also allow customers to invest their cash back earnings into their savings account.

However, each one of these credit cards has its own benefits and drawbacks which a user must take into consideration while making a selection. So before making any conclusion, let’s try to comprehend how these options work –

  • Reward Points – It is one of the oldest forms of benefits offered on credit card transactions to customers. Depending on the type of credit card, points are allocated on each Dollar spent. Platinum, Gold or any other form of privileged cards offer more reward points per purchase when compared to normal cards.
  • Cash Back Scheme – It is most recent phenomenon, in which user gets cash back on his each purchase. A cash back credit card offers direct benefits to customers unlike reward points on which user achieves benefits much later. Credit cards with cash back scheme are extremely popular because they don’t have the same limitations other credit cards have.

Comparison

A credit card with cash back features normally pays between 1 to 2% on every credit purchase. A customer can obtain cash rewards in different forms like an immediate discount on a purchase or cash back in the credit card account. For credit cards with reward points, customers can earn reward points when they make purchases through any store. After rewards points to a certain limit, customers can redeem their points in the form of cash. So an individual may have to wait until the pre-defined limit for reward points is achieved in order to redeem them.

Most of the cash back credit cards don’t have any annual fees attached to them. So a user won’t be losing any benefit in the form of cash back or discounts on purchases. On the other hand, most of the reward point credit cards come with excessive annual fees, which may eat up your entire advantage.


The amount of benefits a user can obtain through cash back credit cards mainly depends upon the seller or service provider. On the other hand, the benefits offered by reward point credit cards mainly depend upon the deal a user has. So, if you are a lavish spender and shopaholic then reward point credit card can be preferred choice for you.

Credit cards which offer reward points may offer benefits of higher value as compared to cash back credit cards, especially for purchases done at supermarkets, gas stations and merchant network stores.

Selection of credit cards also largely depends upon the amount of expenditure you incur. If you fill fuel at multiples outlets or if you are a frequent flyer then a reward point credit card is beneficial over the cash back credit card.

Conclusion

Before making a choice between reward point or cash back credit card, you have to weigh the advantages and disadvantages of both of these credit card types. If you use your credit card on rare occasions then you can opt for cash back credit card to avail immediate discount on your purchase. But if you are frequent user of credit card then you can opt for credit card with a reward point scheme as you can accumulate reward points quickly in multiple purchases. Therefore, an individual must make the selection on the basis of his spending habits in order to enjoy the benefits offered by these credit cards.

No matter which type of credit card you select, it should be utilized with the utmost caution and your expenses must be within your budget. Before making a final decision, you can do a cost benefit analysis on the basis of your current expenditure and enroll once complete.

This is a guest post created by Richard Cox.

Image courtesy of sixninepixels / FreeDigitalPhotos.net

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26 comments

  1. Reward programs are an added incentive for credit cards but they’re not always useful. We recently had a few points added to our card and after going through the accredited retail outlets where we could redeem our points, we ended up buying something we simply didn’t need at the time (a very expensive leather pouch). Perhaps this feature is more suited to highly developed economies where options are vast.
    Fehmeen recently posted..Innovations in Mobile MoneyMy Profile

  2. I’m not a fan of the reward point cards. I have both and my cashback card is definitely a better deal, and that’s even with me using it for pretty much any purchase I can.
    DC @ Young Adult Money recently posted..The Weekly Quick Hits RoundupMy Profile

  3. I like rewards cards for travel/hotels only. I don’t like rewards points for “buying” things from the credit cards online store with the points. I don’t need those things in the first place so it’s no draw for me.

    Cash back cards are something I’ve never really used but my brother does have pretty good luck with one so I might look into one next.
    Tara @ Streets Ahead Living recently posted..Aren’t you shopping this weekend?My Profile

  4. I think the rewards cards can be good, you just have to know how they work and make sure it’s worth the time and effort. That said, if anyone is going to give me something for free (especially money) for something I’d already be doing anyway then count me in!
    John S @ Frugal Rules recently posted..How Much Money Will it Take to Kill Cable Television?My Profile

  5. I like cash back for the simplicity. Unless the rewards are for something I use regularly and there aren’t any restrictions, I’m not going to bother.
    Matt Becker recently posted..Stop Buying Features. Start Buying Benefits.My Profile

  6. I use a cash back card and apply all the cash back to my credit card bill. I love it.
    Stefanie @ The Broke and Beautiful Life recently posted..Failing to Plan Ahead Destroys BudgetsMy Profile

  7. My wife and I both have travel rewards cards, since we fly to Asia on a regular basis. We pay the vast majority of our monthly expenses with the cards and pay them off in full every billing cycle. We’re able to rack up some serious travel points without incurring any interest at all.

  8. Nice overview of rewards programs. It’s also worth it to search for good bonuses with cash back cards. For example, the Discover It is a decent cash back card but if you go directly through Discover’s website, there is no cash back bonus. But if you google around, I’ve found a link for a $150 cash back bonus. It’s worth it to at least check.
    Syed recently posted..How to make your money work for youMy Profile

  9. I generally prefer travel rewards over cash back. If you use them wisely, you can travel in luxury for not much cost. It does take some patience to sort through the best programs, but it’s kind of like a game at this point.
    Kim@Eyesonthedollar recently posted..Making an Extra $600 For Ski PassesMy Profile

  10. We are definitely in the cash back cards camp. However, with our current cash back card (Citibank) I do not think we have the option to apply the dividend directly to our bill as some do. I may have to look into that!
    Dee @ Color Me Frugal recently posted..Budgeting (or not!) the lazy wayMy Profile

  11. I have a card that doesn’t charge fees for overseas ATM withdrawal, that is the best card for me as it easily saves me $500 a year or so. Most shops around here don’t accept credit cards anyway so I wouldn’t rack up too many miles.
    Pauline @RFIndependence recently posted..Carnival of Financial Independence, 36th editionMy Profile

  12. Looking at the comments above I think it’s interesting that there’s a 50/50 split between those that prefer cashback over travel rewards. Wonder why that is?
    Ryan Hart recently posted..Is Home Equity Loan Interest Tax Deductible?My Profile

  13. Rewards programs are good, but most of this offers they require a minimum spend that is too high in order to quality for the bonuses and rewards.

    • Most cards don’t require a minimum to earn the actual rewards. You earn points or cash back with every dollar you spend or local currency. Actually getting the bonuses can take more money though.

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