Personal Finance: Types of Rewards Credit Cards
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Traditionally, people use credit cards just to get the cash advance in order to purchase particular goods or services, and later they will have the obligation to pay the money back to the card that they have spent. If they missed the payment then they have to pay the interest fees for using the bank service.
However, there are also other forms of credit card rewards, which offer cashback rewards and other incentives to maximize the benefit of customers for using reward cards.
Rewards credit cards have a cross range of products, which are designed to meet individual financial expectations and needs. For this reason, you may take your own time researching around about different types of credit cards rewards in order to get the most benefit out of your card.
In this article today, I am going to share with you the different types of rewards credit cards and how it works, and hopefully, it might help you to improve your general knowledge and information in order that you can find the best rewards credit cards for your own needs.
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- Before signing up, consider making a comparison among cards.
- Different types of credit card rewards have different functions and benefits.
What is a Reward Credit Card?
Basically, Rewards credit cards provide different types of rewards, which include cash rewards, travel miles rewards, and points rewards. Those rewards are calculated based on every dollar you spent based on the condition of the rewards credit cards you use.
In particular, you may receive cash back rewards, free travel tickets, or have point rewards for purchasing a free product. Hence, Rewards credit cards have different types and functionalities, which depend on how you select the best one to maximize the benefit of using the bank product. For example, if you are a regular traveler, then select a travel rewards credit card to suit your best because every dollar you spend, will transfer to the redeemable points for purchasing a free air ticket in the future.
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How Do Credit Card Rewards work?
Rewards credit cards have become the most popular in terms of the number of customers using credit cards in the market today, this is because those rewards cards have their intentive program to offer a money-back to customers such as cash rewards for every dollar they spend.
For this reason, there are several types of credit cards rewards, which each have their own functions and redeem structure. Hence, the best way to find the particular rewards credit card is to identify your current situation and choose the one that can maximize your benefits.
Normally, financial institutions or banks offer different types of redeeming options for using a credit card reward, which could be paying rewards as checks, gift cards, and travel rewards.
How Do I Check Whether there are current Rewards on my Card?
This could be done by checking your rewards credit cards statements, which are normally released at the end of the credit card billing cycle or each quarterly.
Moreover, many credit card companies or banks have their own marketing and product strategy to attract customers to sign up for their rewards credit cards program. the program offered to customers could be an incentive of up to $200, offer no interest charge for several months, or even waive the first-year fee for using their rewards credit cards.
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Different Types of Credit Card Rewards
As mentioned before, card rewards normally have three main types of incentives, which are cash rewards, travel rewards, and point rewards. The cash rewards will add up the money incentive directly to your credit balance at the end of the billing cycle. Travel rewards are a bit different as they will add up the point to your card in order that you can purchase an air ticket. And the last one is point rewards, every dollar you spent, will directly add up points to your reward credit cards, which allow you to use the point to purchase a gift card, or book a holiday.
Let’s take a look at each type of reward credit card to dive deeper into their function and other benefits.
Cash rewards are one of the most popular types of reward credit cards because they are easy to use, and the credit card companies will pay cashback to your credit card account at the end of the billing cycle or each quarterly.
Moreover, other cash rewards have the option for customers to select, which either send reward money as a check or direct deposit to your appointed bank account.
You also might use the cash rewards to redeem gift cards based on the list of available merchants, that your bank currently works with them. Depending on each credit card company, customers may be able to claim a redemption, normally a minimum of $15 or $25.
Travel Rewards Credit Card
Travel rewards credit cards offer you redeem points for every dollar you spent, which you may use those points to redeem or purchase for an air ticket. Notes, you only can use the redeem point to purchase an air ticket with an appointed Airline, which is in a contract with your credit card company.
For example, CitiBank offers a Citi premier Qantas card ( Citibank rewards) to the customer, which allows them to use the redeem points for purchasing air tickets from Qantas Airway (finder, 2021)
Depending on each type of rewards credit card, customers may be able to transfer redeem points to other rewards programs. But, you may lose your point for doing that because they prefer customers to stick with what rewards programs they currently offer.
Moving to the points rewards program, this type of reward is pretty straightforward as the bank will count or redeem your point based on how much you spend. In other words, customers can use the point they earn for redeeming gift cards, cash, or even travel tickets.
The best option of using point rewards is to redeem the discount or gift cards to purchase products or services at a particular merchant. This is because you may use point rewards to redeem discount codes ranging from %10 to %30, which will be adding more value to every dollar your spend.
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How to Compare Credit Card Rewards
The last part of this article is to give you information on how you can compare different credit card rewards based on using a list of key points, which allow you to select the best reward credit card to suit your financial needs.
- Annual Fees: this is one of the most important steps because you need to fully understand the annual fee of a particular reward credit card before you sign up. Consider reading through the terms and conditions, which allow you to find out how much the bank will actually charge you a fee for using their product. Also, check if they have the option to waive credit card rewards for spending up to a certain amount of money such as $10,000, $20,000.
- Interest Rates: the next important step is to always check the interest rate based on your chosen card, this will allow you to reconsider or even decline the offer, and you may choose a better one to maximize your benefits. Normally, most credit cards have a very high-interest rate, ranging from 14% to 18%, and you might always lookout for a lower interest rate reward credit card.
- Tiered Vs. flat Rewards: consider checking whether your card is on a tiered rewards structure or flat-rate rewards. For tiered rewards credit cards, you may receive different kinds of rewards based on your purchase, such as you may receive 1 point for every dollar on fuel, and 3 points for every dollar for cosmetics. While flat rewards offer you a fixed rate of reward for whatever you spend.
By Jiro Nguyen.
The content is only based on the author’s personal opinion and his understanding. It is used for informational purposes only, and you must not rely on it as a comprehensive or a substitute for professional advice.