How Do Reward Credit Cards Work?

Reward credit cards, also termed as loyalty cards are given by credit card companies to their clients as an incentive to purchase using the credit card in consideration of the reward points which they can redeem in cash or in kind. The more you buy using your credit card, the more points you will earn. The reward cards that are most preferred are the ones that give cash or flyer miles depending on amount of purchases. Major credit card companies compete in coming up with the best package of the best rewards to win over clients to their side.

Annual Membership Fee

Credit card holders who use their cards for almost all of their purchases will get the best deal out of the reward credit cards. However, most of these cards require annual membership fee, the amount of which sometimes depend on the quality of the rewards. You should take the amount of the annual fee into account when choosing your credit card to see if the value of the rewards you will get at least exceeds the annual membership fee.  You should see if your regular purchases can cover the points to get you a profitable reward benefits.

The Basic Rule of Credit Card Use

There is only one rule to follow in using the credit card, regardless if it is a cash reward card or an affinity credit card, you should pay the full amount purchased for the month, otherwise, whatever savings and rewards you will get from the card will be canceled out and the interest charges will be more than the benefits you hope to get from using the card.

Reward Cards

These types of cards can get you flyer miles and more. The points earned can be used to redeem free gasoline, gift certificates from affiliated merchants or other purchases or it can even be applied for car purchases. The flyer miles may sound inviting but if you are a frequent traveler, this reward will quite be worthless for you. The cash rewards or discounts for items bought will be much preferable as it could add to your budget.

It might be quite tricky to decide which the right reward card for your requirements is. For other types of credit card, the choices are limited as it could be a card to transfer your balance or zero percent interest rate on purchases or an adverse credit card. With the reward card, you are obliged to settle the full amount purchased, compute the annual membership fee and calculate how much you regularly spend in a year to come up with an analysis if it is worth getting the card just for the rewards.