Credit Card Reward Programs: The Basics

Credit card reward programs started springing up as a marketing tactic so companies could help establish brand loyalty among their customers. The basic premise was simple. In exchange for using a company’s credit card, a customer would receive a variety of rewards. The concept was so effective at both brining in new customers and keeping existing ones that most of the other credit card companies caught on. Now, so many credit card reward programs exist that trying to choose a specific one could be a daunting task for a consumer. Well, before consumers get totally overwhelmed, they should keep in mind that all credit card rewards programs pretty much work the same. This means purchases must be made in order to make a customer eligible for their rewards. What these exact rewards are will depend on the specific credit card reward program the customer signed up for. The most common types are detailed below. 1. Cash Back Reward Credit Cards Just as the namesake indicates, cash back reward credit cards allow a customer to accumulate a small amount of cash each time they use their credit card. This cash value ranges from 1 percent to 5 percent. It is usually redeemable when a certain amount has been accumulated. When a person is eligible to receive their cash, they might get it in the form of a check, store discounts or as a credit against their current balance. 2. Point-Based Reward Credit Cards Reward credit cards that work on a point-based system allow customers to accumulate special points each time they use their reward credit cards. These points can be redeemed for a variety of things, ranging from gas, to airline miles to actual merchandise. Although it will still take a while to accumulate enough points to get more expensive things, point-based reward credit cards still tend to offer more value than cash back reward credit cards. 3. Airline Miles Most major credit card issuers offer a version of the frequent flyer mileage rewards program characteristically referred to as travel reward credit cards. The airlines branded credit cards were the most pervasive and generous with mileage rewards. However, more of the major issuers have offered the travel reward credit cards based on a point system. The benefit of the point system is that these earned points can be used to redeem a ticket airline on a variety of airlines. The airline credit cards offered frequent flyer miles on only their airline. The general terms for both types of reward credit cards tend to work the same. This usually means annual fees and higher APRs. Additionally, if a person is late, the resulting finance charge could lessen the value of the points or cash they receive… if the credit card company still lets them receive it. Indeed, if a person does sign up for a rewards credit card, they must make sure they not only use their credit card often but that they also promptly pay any bills that are generated. If a person wants to make the task of finding the right rewards credit card easier, they can try using online credit card comparison sites. These are available in various categories on this site, selectrates.com. All a person has to do is type in “rewards credit card”, and they will receive hundreds of hit relating to their search. When using these sites, a person needs to pay close attention to: the rewards being offered, the annual fee, the APR (also known as the interest rate) and the terms regarding reward points or cash back when payments are late.