How to Make the Most of Rewards Cards

Getting rewards cards is a great way to maximize your buying power when using a credit card. Many credit card companies have introduced rewards to help to encourage customer loyalty. The first reward card ever issued was by Discover way back in 1980. This was the first ever rewards card that offered cash back on any purchase made. Since then many credit card companies have followed suit and have begun offering their own rewards programs.

Types of Rewards Provided by Rewards Cards

• Cash Back - The original and still the most popular reward. Some companies may offer unlimited cash back on any purchase made although many credit cards do have limits to the amount of cash you can earn in any given period.
• Miles - Some rewards programs offer frequent flyer miles with every purchase. These miles can then be used to get free flights, hotel upgrades and more.
• Merchandise & Gift Cards - Many rewards program will not only offer cash back but also offer general merchandise and gift cards. You may even be able to get a gift card valued higher than the cash back you would normally receive.
• Donations - Some credit card rewards programs will automatically donate to your favorite charity with every purchase that you make.

How do Rewards Cards Work?

Most rewards programs work by using a points system. You earn points with every purchase than can later be redeemed for cash or other merchandise. Some programs even offer double points on common purchases like groceries or gas. It’s important to know whether or not your points expire as you are accumulating them. Some programs will expire your points after a year or two if you don’t use them.

Most rewards programs will allow you to earn points on any type of purchase no matter what it is or where you use your card. This is a huge advantage for people who regularly use their credit cards to make their day-to-day purchases.

Other Incentives

Most rewards cards offer other incentives apart from cash back or points earned. These incentives may include:

• Travel Insurance - Covers you in the event of an accident while you travel. Typically this will only cover accidents that occur during transport (on a plane, bus, train etc).
• Rental Car Insurance - If you use your rewards card to rent a car insurance may be already included. It’s important to know if it is so you don’t pay for something you don’t need.
• Discounted Rates - You may also qualify for discounted rates when you use your rewards cards at affiliated businesses such as restaurants and hotels.

Disadvantages of Rewards Cards

The biggest disadvantage of rewards cards is that they typically carry a much higher interest rate than other credit cards. The higher interest rates are used to help offset the cost of the rewards being offered. The best way to take advantage of rewards programs is to only charge what you will be able to pay off at the end of the month and never carry a balance. This way you can enjoy all the perks and benefits without paying any interest.

Another disadvantage is that rewards cards are typically more difficult to qualify for. Normally you will need an excellent credit score to qualify for the best rewards cards. If you plan on applying for a credit card with a rewards program it’s important to make sure your credit report is free of any blemishes that may cause you to be declined.