These days you can’t watch TV or listen to the radio without being bombarded with one rewards credit card commercial or another. Loyalty reward cards are big business. Naturally, card issuers are in the business of making money. So, why are they offering consumers money back? To put it simply, these cards lead to more revenue for the banks and other financial institutions that issue them.
Despite these facts, you CAN come out ahead with loyalty reward cards. To accomplish this however, you must live within your means. Don’t carry a balance. Don’t max out your card. And don’t buy things simply to earn rewards. It’s just that simple.
You earn credit card rewards two main ways:
In a bid to garner your business, most loyalty reward cards now offer a large initial reward when you open a credit card account and spend a specified amount during a finite time-frame. This is in the form of cash back, miles or points. For example a travel rewards card may credit your account 40,000 miles once you purchase $3,000 on their credit card during the first three months that you own the card.
You must continue making purchases with your card to continue earning rewards. With cash back cards this translates to a percentage of the dollar amount you spend on purchases. For cards that offer points/miles, you earn a set number of points for each dollar you spend. Most points/miles rewards cards offer a 1:1 ratio at a minimum. They also typically offer multiple points for specific categories. For example, you may earn 3 points/miles for all of your travel purchases and 1 point for all other purchases.
Some cards also offer Anniversary Bonuses. At the anniversary of your account opening, they will credit you with a bonus number of points/miles, or reward you with some type of perk, like a free night at a hotel or complimentary tickets to a sporting event. These cards usually charge an annual fee.
Once you earn your rewards, you want to reap the benefits, right? Some cards set thresholds that you must meet before you can redeem your rewards. For example, you may not be able to use your points/miles until you have accumulated 2,500. However, many cards now allow you to redeem their rewards as soon as you earn them. These cards typically let you offset the cost of your purchases with your rewards when you pay your monthly bill.
This brings us to HOW you redeem your rewards. The following options are typical for rewards redemption.
Card issuers are in the business of making money. Rewards are set up to further this goal. You can realize lucrative savings, discounts and freebies with rewards cards with dedication and discipline. Awareness of the traps issuers set to make a profit off of you is the first step. Select the card best suited to your buying needs as the best reward cards are the ones suited for you. Use restraint and only purchase what you can afford. And, finally, never carry a balance, as this will inevitably wipe out the savings you earn with your rewards.
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