As big credit card companies compete for customers, there are always plenty of credit card rewards. Cardholders today can get free sky miles, hotel and travel points, cash back on purchases, and even put money into an IRA or a savings account that earns interest.
But which reward from a credit card is better? Cash back or points? The main factors are the interest rate given to card applicants based on their credit scores and the small print about how to get points and cash back and how to use them.
When choosing a credit card rewards offer, think about what you want most and how many rewards you can get from it. Since it can be hard to figure out how to use points, many people choose cash back credit cards instead. With a cash back card, they know exactly how much money they'll earn, and it's much easier to get their money back. Even people who travel a lot will often choose a cash back credit card over a points card because it gives them more options for how and where to spend the cash back. They don't have to worry about dates when they can't use their points or being limited to a certain airline or hotel.
When people choose a rewards card, they also have to think about card fees and whether or not they will pay off their balances in full every month. If not, fees and interest could cost more than the cash back and points that were earned.
Credit Federal recommends a cash-back credit card instead of a points card for people who don't travel often or who don't use a certain airline or hotel. Some airline miles cards can only be used on a certain airline and may only be used on certain dates. With cash back rewards, not only do you know exactly how much you'll earn per purchase, but it's also much easier and more flexible to get and spend your cash rewards. At Credit Federal, you can look at the rewards that major credit card companies like American Express, Chase, Citi, Discover, Visa, and MasterCard offer.
A credit check is also done on people who want credit cards with rewards. Most of the time, the credit requirements are higher if the rewards are better. People with bad credit are seen as a high risk, so most of the time they don't qualify.
Before you apply for a credit card with rewards, think about the following:
Pay off your balances in full every month to get the most out of your rewards. If you can't pay off your card balance in full every month, choose a card with the lowest interest rate possible.
Check the rewards caps to see if there are limits on how many points or other rewards you can earn.
Find a rewards card that doesn't have an annual fee. If you don't use the card often enough or in the right way, the fees you pay may be more than the rewards you get.
Avoid cards with expiration dates on their rewards.
Avoid card rewards that are only good for the first few months.
Look around for perks. Some rewards cards come with free extras like travel insurance.
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