Choosing A Credit Card Rewards Program
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.
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.
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.
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