How to choose a reward program that is right for you
What could be better than a credit card that rewards you for using it? Extra cash, luxury vacations, merchandise—and it’s all free. Or is it?
Every reward costs something, even if it’s just the effort of earning it. That’s why it makes sense to get the facts before you apply.
How do rewards work?
Most programs give you one or more points for every dollar you spend in purchases. Some only give points for certain items like gas or groceries, or for shopping at certain stores. There are also airline programs that give points for the number of miles you travel, in addition to points for purchases.
The more you spend, the more points you can earn, so try to pick a card that suits your lifestyle. If you don’t drive, don’t get a gas rewards card. And if you never fly, an airline miles card won’t make sense for you. There are many different types of programs available . Look for one that makes it easy to earn something you’ll really enjoy.
Managing Credit Tip #1
To make the most of your credit card rewards program - use your card for everyday purchases to earn lots of points, then pay it off each month to avoid interest.
What can you get?
Credit card companies now offer rewards that appeal to almost every taste. Some cards offer just a single type of reward, while others offer your choice of many different options. Reward types include:
- Cash back. Some cash back cards mail you a check. Others deposit cash into your savings or investment account, or credit it to your statement. Some will even send the cash to your favorite charity.
- Merchant-specific programs. Get money back when you shop with certain merchants or earn discounts on future purchases.
- Travel. Get rewards for using a particular airline, resort, hotel chain or even cruise line. Some cards give discounts on your choice of multiple airlines, as well as hotels, car rentals, dining out and more.
- Merchandise and gift cards. Choose rewards such as sporting equipment, housewares or electronics, or get gift cards for retailers, restaurants and more.
- Experiences. Meet a sports hero, enjoy a cooking class with a world-class chef or a get back-stage pass to meet your favorite band.
What do you need to know?
- How do rewards add up? Every program is a little different. Consider how many points you get for a dollar, and how many you need to get a reward. You should also check to see how many points you can earn each year and how quickly those points expire. It pays to shop around.
- How easy is it to get your reward? Many cash reward programs reward you automatically as soon as you’ve spent enough to qualify. With others, you can redeem your rewards online or by phone whenever you choose. If you can, check out how user-friendly the company’s Web site is before you apply.
- Is there a catch? Often, rewards credit cards charge an annual fee or have a higher interest rate than other cards. There may also be a fee to redeem your points or shipping fees to deliver merchandise rewards. A great program may be worth the extra cost but be sure you understand all the details up front.
Take action now.
Remember, with a rewards credit card, the more you buy, the more rewards you earn. However, running up a big balance just for rewards may not be a good option. To maximize benefits while minimizing cost, use your card frequently but be sure to spend only what you can afford to pay off every month. With a little caution, a good credit card can be a very rewarding experience.
What's next? Basic facts about credit card rates
