Rewards or Cash Back ? Credit Card Choices

Posted by Nick Niesen on October 29th, 2010

A very common question you hear asked these days is which is the better, cash back or rewards credit cards loyalty schemes. The following is a brief explanation of the cash back vs. rewards credit cards loyalty schemes argument:

Cash Back Credit Cards

As their name suggests, cash back credit cards offer customers the chance to reclaim a certain percentage of their credit card expenditure in the form of a cash back payment. This payment can be made either as a credit on the balance of the customer?s credit card statement or in the form of actual cash being paid to the customer.

In most cases, the cash back being offered is in return for purchasing certain brand-named products or for using the card in particular stores. Thus, while it is true that you are getting a percentage of your purchase price back as a cash back reward, the bigger question you should be asking yourself if whether or not you would have purchased the product in that shop had you not been offered the cash back!

Rewards

By far the more popular credit card loyalty scheme is the rewards program. Here, a card provider will offer a certain number of rewards points per threshold amounts spent using the card. This way, the more you spend on the card, the more rewards you receive. Within a specified deadline date, you then need to exchange the points that you have accrued for a reward.

The reward can be in the form of air miles, household products, or any one of the other rewards usually set out in a catalogue sent to the card provider?s customers. The major difference between the rewards loyalty scheme and the cash back loyalty scheme is that the rewards scheme usually works on the amount you spend, not the product you buy.

Advantages of the Reward Schemes

A credit card with a fruitful reward scheme is more common, and often more valuable, than the cash back scheme because the affiliated credit card company makes a certain amount of profit from its goods. Think about it, if you spend $100 in store how much did these goods actually cost the company? The profit that they make can e offered with the reward scheme of the credit card, keeping customers happy. If they only offered cash back then this may be at 50% of the reward rate.

Therefore if you can choose a reward credit card that you can use, i.e. a store where you regularly shop then the best choice in this debate must be the reward credit card scheme.

Regardless of what your personal feelings are towards the cash back vs. rewards credit cards loyalty schemes, if you are applying for a credit card today then it is most definitely in your best interests to ensure that you are offered one or other of the two loyalty schemes as to do otherwise could mean you missing out on a golden opportunity to have your credit card giving you something for a change!

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