The best credit card rewardscards are ones you understand well and use. A credit card by any other name is not the same. Have you been asked by a store clerk if you’d like to sign up for a “rewards” card? Maybe a “club card”. Maybe a “store debit?” There are different names for what seems to be a trend in stores offering cards that look like credit cards and smell like credit cards, but they are not credit cards – they are reward debit cards.
The first credit card was the Diner’s Club card which hit the scene in 1949. From there, credit cards grew in popularity until they became quite ubiquitous in the 1980s and now you’d be hard pressed to go a day without seeing a credit card, credit card bill, or credit card advertisement. By the dawn of the new millennium not only had credit card usage become common but so had credit card debt.
As the United States began to weather the recession of 2008 many people started trying to pay off their credit cards and reduce their unsecured debt. Of course, some companies looked for ways to take advantage of this to bring in customers. Enter: the rewards cards.
There are some simple rewards cards that work rather like a frequent flyer card: the more you buy the more points you earn. Then, you can redeem those points for things or discounts. But in recent years a different card as emerged – the debit rewards card. Target was among the first to offer this type of card.
How this card works is you attach the card to your checking or savings account. Then, every time you use the card the money is automatically deducted from your bank account, just like a debit card. Actually, as of 2014 it worked more like an old fashioned check because there is usually a 1-3 business day delay between the time you use the card at the store and the time the money is actually deducted from your bank account.
Why use one of these cards? Because it offers you a variety of benefits. Often, you will get a discount on all purchases made with the card, as much as 5%. You might also have an extended warranty period or return period, as well as the ability to return things without a receipt. Sometimes these are the best credit card rewards, but they aren’t truly credit cards.
Of course, credit cards offer rewards as well – sometimes the best credit card rewards. For example, when you use a Lowe’s credit card you save 5% on your entire purchase, just like the Target reward card. But Lowe’s is an actual credit card. And a rewards card that is not a credit card does not help you build your credit as it is not credit based – it’s just hooked to your bank account. So while they can offer you discounts and perks, while not tempting you to fall into debt, these new-fangled rewards cards have their limits. Literally – most of the time you can only charge $400 – $1000 at a time on them, so they may not cover your holiday shopping.
When you choose between a store rewards card and a credit card with rewards think through how you will use the card. Remember, also, that every program is unique. For example, how credit card miles work varies from company to company with some giving you a mile for every dollar, others less, some letting miles expire after a year others giving no expiration and so forth.This means that the best airline mile credit card for one person, where expiration date is important, might vary against another person, for whom miles traveled is more important.
Birth of Credit Cards. http://www.investopedia.com/articles/financial-theory/08/history-credit-cards.asp
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