Credit card rewards are among the top reasons why people use the plastic. Who does not want to get discounts, even if it’s just a small percentage, on all purchases? There are even cards that can give you free hotel stays and can pay for your next round trip journey. If you are searching for your next credit card that comes with rewards, you may want to look at rewards structure and the overall rewards program of the card.
Three Main Rewards Structures
You have three choices when choosing your next rewards card. These are in the form of:
- Points – This is probably the most popular type of reward available today. Points are based on how you use your card. Typically, you can get a point for every dollar you spend against the card. There are also cards that give bonus points for special categories.
- Miles – This is similar to the point system except that instead of points, you will be awarded with miles. Another difference is that points are usually used for gift cards, items, and other stuff. Miles, on the other hand, are for travelers since these can be exchanged for air tickets and even hotel accommodation.
- Cash – Although points are the most popular type, cash back rewards are the most preferred. As the name implies, you are given cash back on every purchase you make. There is an equivalent percentage for every dollar spent. You can redeem this reward through checks or as an addition to your credits.
For comparison purposes, one point or one mile is worth one cent.
Before you sign up for a card, determine whether you can really get the most out of it. Rewards cards claim that you can save money using their program. However, if you compare them with traditional cards that have no extra features, you will find that they have higher APR and other fees. In this case, you should compute the true amount of rewards that you will gain each year with your card.
Calculating rewards is fairly simple especially if you have a cash back credit card. However, this becomes complex when there are different methods of measurement on a variety of categories. TrueEarnings® Card from Costco and American Express is one of the best rewards cards available today. It gives cash back on all your purchases and adds more when you use it for gas purchases. Another is Chase Freedom® Visa, which gives you bonus cash rebates, cash back for every dollar spent, and another cash back system is applied for rotating categories. Sometimes, you can earn 5% on fuel acquisitions; at times, the percentage is for your groceries.
The revolving categories make it difficult for you to calculate how much you can truly earn. Aside from that, there are credit cards, such as the Blue Cash EverydaySM Card from American Express, which offer unrestricted spending bonuses. Other cards though put limits or caps on the amount of credits that you should earn to become eligible for cash back bonuses.
One important reminder is that a rewards credit card is not for everyone. If you usually carry a balance, this type of card may not be ideal for you.
Check out some of the cards that offer enticing rewards programs: