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The fact is reward programs will not make you rich, and they will not change your life. What they will do is offer you a bit of a monetary advantage over other cards that do not have the same program or offer the same deals.
Cash Back Programs
The idea of the cash back program started with Discover Card in the mid 1980's. Discover was a new business venture and was trying to take market share from Visa and Master Card. By creating the first cash back offer on purchases, Discover, which touted the new tagline "It pays to Discover," became a household word in the credit card industry. In order to stay competitive, competitive firms had to introduce comparable offers.
Cash back programs typically offer consumers from 1% up to 5% back on all purchases. Balance transfers and cash advances are not included. Cash back programs carry numerous benefits.
First and foremost, a cash back reward gives you money that can be spent as you see fit. It's exceptionally flexible, unlike points programs that can limit how and when you can use the points that you've accrued. You may want to consider cash back programs as a rebate or discount off of each purchase.
A 1% cash back bonus arrangement gives you a dollar rebate for every $ 100 dollars that you spend. With many such offers, using your credit card for groceries results in a higher rebate, often 3%, and even more of a rebate for gas, usually 5%. Also, these cards typically carry a low introductory purchase rate for a specified period of time.
If you have a cash back card with a reliably high credit limit, you may want to consider paying as much as you can each month with that credit card. Groceries will add up quickly, as will gas, rent and / or mortgage and utility bills. If you're using your cash back card in this manner, you'll want to pay off the balance each month, including the full benefit of your accruing bonus bonus.
In terms of return, points programs tend to make you feel like you are receiving rewards more quickly. In most programs where consumers earn points, they are given a point for every dollar that they spend.
With this type of credit card offer, you'll receive points with each purchase but, similar to cash back cards, balance transfers and cash advances are not included. Points can accumulate quickly and certain purchases, such as airline tickets, hotel rooms and gas, may qualify for double points.
Points programs typically give you a wide range of discounts on a variety of items, including car rentals, airline tickets, vacation packages and much more. You can earn gift cards and merchandise discounts from points programs. Different cards offer various types of points. You may be interested in a credit card that will allow you to use your points towards a vacation, a romantic trip abroad or high-tech home entertainment products.
Usually, you earn a point for every dollar you spend or, with special offers, it could be two points for every dollar. Unlike cash back offers, these points do not translate directly into dollars. Instead, a certain number of points will equal a specific amount of cash off of a purchase.
As an example, you have acquired 5,000 points. When you go to rent a medium-sized car, you may be able to cash-in 2,500 points toward a $ 25 discount on a day's rental. What you've done is spend $ 2,500 to get a $ 25 discount on a rental that without the discount would have cost $ 75. With a cash back card you would have achieved the same reward value of $ 25, the difference being that because you receive cash back you are not limited to what you can use your reward towards.
The Chase Freedom card is a good example of a innovative new credit card rewards product which gives consumers the flexibility to switch back and forth between redeeming points for cash or redeeming points for discounts.
Before choosing your card, it's important to determine whether access to a variety of reward options versus a particular rewards program is more important to you. If you do not travel a lot, then certain programs will not be of use to you.
Also, look at the annual percentage rate (annual rate of interest) versus the rewards program. You may be paying for the rewards you're receiving by agreeing to a higher interest rate. This is especially true if you carry a balance on your credit card. Also consider if there are annual fees or other hidden costs that negate the bonuses you may receive. Most cash back and reward programs these days do not charge annual fees.
Still, a solid rewards program and / or cash back incentive can equal some savings, especially because it's being rewarded for items and services that you would normally spend money on such as gasoline, hotel rooms and travel tickets. Enjoy the discount you've earned it!