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MANY credit cards offer reward-based loyalty schemes to get consumers to take out the card or to keep spending on it.
Reward credit cards can work in your favor though – used correctly: repaying your spending in full each month, you can make yourself a few bucks just by switching the type of plastic you do your shopping with.
The main types of reward credit card on offer, include:
What are credit card reward schemes?
Credit card reward schemes give you 'points' when you spend money on the card.
Unlike a shop loyalty card (Boots Advantage Card, etc..), reward credit cards usually offer the added bonus of being able to earn points on all your spending - not just when you spend at a particular shop or with a particular company.
Obviously, nothing in the financial world comes for free - and credit card companies wouldn't be offering these rewards if there wasn't something in it for them.
From a skeptical point of view, these cards are really made to get you spending with the hope that you won’t meet your repayments in full and the card company will earn lots of money in interest charges.
However, play the game right - always repay your spending in full - and you really could see yourself on an all expenses paid shopping trip or flight across the world (well, not quite, but you get the idea...).
Also, don't confuse reward credit cards with store cards - reward credit cards offer the same interest rates and fees that you would find on a standard credit card.
Although the only way to really line your pocket with a reward credit card is to repay your spending in full – if you don't, you won't be charge the kind of extortionate rates that you'd find on a store card.
How can I benefit most from a reward credit card?
Reward credit cards are great for people who want to get a little something back from their credit card spending.
With a great choice of reward options available it shouldn't be too difficult to find the perfect card for your needs in terms of rewards as well as in terms of the more unexciting stuff like interest rates and fees.
You will find rewards cards available from a range of credit card issuers, so you can compare from a wide pool of reward cards to find the one that suits you best.
When used sensibly, reward credit cards can help you to make the most of your spending, and although the level of rewards is usually quite low, they will build up over time, particularly if you use your credit card on a regular basis.
Popular rewards include discounts at specified retailers; loyalty points that can be redeemed for money off vouchers, gift vouchers, attraction tickets, cinema tickets, and more; air miles for frequent flyers; travel benefits and discounts; and cash back on purchases made with the card.
You should remember that the rewards on these credit cards are only granted on purchases made with the card and not on cash transactions. You should therefore avoid making cash transactions, as these will cost you money in terms of charges, and won't earn you any rewards.
Another thing to bear in mind is that if you like to spread your repayments you may be better off with a 0% interest or low interest credit card rather than a rewards based card.
Namely, because any rewards that you earn will be offset by the interest that you pay, whereas those that repay their balance in full each month can enjoy earning rewards without having to pay any interest - in other words, for free.
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