Rewards credit cards are meant to "reward" loyal customers by giving them something back. There are different types of rewards programmes, such as points, cash back, frequent flyer miles, or merchandise. Rewards credit cards are always getting better because that's how credit card companies compete to get new customers and keep the ones they already have.
Even though all rewards credit cards sound great at first, you should learn more about each one before choosing one. If you don't read the fine print, your rewards card might benefit the credit card company instead of you.
If you carry a balance from month to month, rewards cards don't give you anything. When you use a credit card that gives you rewards, the interest rate is usually higher than on a credit card that doesn't give you rewards. If you don't pay off your balance at the end of each month but keep it open, you probably won't get anything from the rewards after you pay the interest.
What does it mean "Up to"? You've seen it, you know. There are rewards credit cards that offer "up to" 1% cash back. This means that you might earn a lot less than 1% cash back until you spend a lot of money on your card.
How much do people who use their cards pay for the rewards? Most people who are looking for a credit card compare the points or gift cards you get from different reward cards. Find out how much those points or rewards are costing the cardholder. This is the best thing you can do. Does it really make sense to spend $10,000 in a year to get a $50 gift card?
Frequent flyer miles are a great way for people who use their credit cards a lot to get free stuff. If you don't, you might have to wait years to get your free flight. If you only use your credit card occasionally, you might want to look into credit cards that offer rewards at lower levels of spending so you can get rewards.
Know what a gas station is and how it works. Since the price of gas keeps going up, gas rewards credit cards are very popular. They are also very kind, since many of them will give up to 5% back on all gas purchases. But on most of these cards, you can only get cash back on gas purchases if you buy it at a "real gas station." You may not get as much cash back at grocery stores, wholesale clubs, and other places that don't fit the card's rules.
A rewards card will lose its value if it has annual fees. Usually. If a rewards card costs $30 a year, you probably have to spend $3,000 before you get any rewards. But if your rewards card gives you twice as many points or miles, the annual fee might be worth it. How often you use your credit card will determine the answer.
Rewards can only go so far. Make sure you know what the maximum rewards earnings are, especially if you use your credit card a lot. If your gas card gives you 5% cash back on gas purchases, but it stops giving you cash back once you've spent $300 on gas, then look at all the rewards you've lost because they have a maximum amount. Also, some rewards will go away if you don't use them within a certain amount of time.
