Today there are thousands of credit cards offering rewards to its members. Determining the best rewards credit card is a personal choice, but there are certain factors to consider that will help you pick the right one!
Cash & Merchandise Rewards
Who doesn’t like cash? One of the best rewards cards, of course, offers cash! Usually with cash back cards there are additional selections as well, such as gift cards, merchandise, and statement credit. Some cards offer a flat cash back percentage while other cards, such as Discover, offer up to 5% cash back on select items during specified time periods. For example, they may offer 1% cash back on all qualifying purchases and 5% for all gas and hotel purchases during the month of July with different promotions running each month.
Some cards will also allow you to redeem your cash back bonus by trading it up for merchandise from their network merchants. There are usually two benefits to a merchant network when using a rewards card. The first benefit is that you usually you get to increase the amount of your bonus when you make your purchase with select merchants. For example, you may have 1,000 bonus points which earns you $10.00 cash back. You could instead redeem your 1000 bonus points for $20.00 by purchasing merchandise from a specified merchant in the network.
The second benefit of the merchant network is that you can oftentimes get a higher percentage of cash back for qualifying purchases made through the merchant network. For example, you normally get 1% cash back for qualifying purchases in retail stores but you get a 2% cash back bonus for purchases made through the online network of qualified merchants.
Cash rewards can also be redeemed for gift cards and statement credits. When deciding which route to choose, you should calculate the cash value of the benefit to determine which reward is the most significant. For example, that same 1000 points that has a cash back value of $10 may have a $15.00 value for a hardware store gift card and a $20.00 value as a statement credit. (Obviously, the numbers are exaggerated for effect, but you get the idea!). Also, with some rewards cards, the more points you accumulate, the more value they obtain. So 1,000 points are worth $10 but 2000 points are worth $25.
You can alternate the type of your rewards redemption as often as your card allows. This means that you can choose cash back this month, a gift card next month, and a statement credit a few months later. Some people save their points all year long and cash them in for a vacation package while others save them for Christmas gift cards. Yet some will simply request the occasional cash back or decide they could use some help lowering their credit card balance and apply some of their reward money to their statement.
However you decide to use your cash reward, you must be sure you understand the program before you begin using it. Many people have been quite dismayed to find out that the points they were saving all year long disappeared because they didn’t use them prior to their expiring. Or, they lost them when their last payment came late for the second time in a row. Some programs never expire nor have penalties, so you need to know which one you have so that you can track it accordingly.
Mileage Rewards
If you never travel by plane then you probably don’t want to invest in a mileage rewards card or travel credit card. If you’re a frequent traveler, however, this could be the best type of rewards card for you. Depending on the rewards card you have, you earn a certain percentage or amount of points/miles for every qualifying purchase. Your rewards can then be converted into free or discounted airfare!
Some cards are airline specific while others allow you flexibility on airline choice. This is also a personal choice you need to make when determining what type of mileage rewards card to get. You also need to read the program details to see if there are minimum mileage requirements or any other restrictions that could impact your expected benefits.
The biggest thing to consider is how much money you actually spend on your credit card every year. If you don’t make enough purchases to redeem your mileage, or if it takes you years to get there, you won’t be reaping any benefits at all. Instead, you would be better off with a cash or merchandise rewards card and just paying for your flight out of pocket. If you are a frequent flyer AND you make a lot of qualifying purchases with your credit card, the airlines credit card is the card for you.
Low Interest Rate Rewards
When people think of rewards cards they oftentimes don’t consider the interest rate. Usually reward cards come with a caveat: a higher interest rate. If you typically carry a balance or foresee some difficulty with your credit card payments in the near future (due to the economy or a currently strained budget) then the best rewards card for you is the one that doesn’t offer any rewards. Instead, it offers a lower interest rate that rewards you with peace of mind in case you can’t pay your balance in full every month.
Think of it this way: you charged enough on your credit card last month to earn you $10 cash back, but you can’t pay your balance in full and you have a 20% APR, which is going to slam you with $200 in interest fees (even an 8% APR could cost you $80)! So, you need to have complete control over your spending habits in order to benefit from a rewards card. Otherwise, you are best off sticking with a low interest rate credit card and calling that your reward.
There are many rewards cards being offered by credit card companies. Deciding on cash back, merchandise, mileage, or a low interest rate is a personal choice. You can compare different credit cards online to find the rewards card that is best suited for you by using our free credit card finder now!
