What Are Credit Card Rewards?

Posted by Nick Niesen on October 29th, 2010

Credit card rewards are bonuses that you receive as you use your card. In general, the more you use the card the more points or rewards you get from the company.

When you are shopping for a card that offers rewards one of the first things you need to decide is whether you want points or cash back. Points are usually redeemed for airline tickets, show tickets, and such. While points are a fine idea for some people, many others find that points are something of a hassle to keep track of.

Cash back or rebate programs are another type of credit card reward. Many people prefer this type of reward program because it is very easy to keep track of and to use. You do not have to worry about figuring out what the points are or how to redeem them when you choose the cash back reward. The cash back amount that you accrue per month is added to your account until you use it.

If you wish to use a point based reward program you should check on the restrictions that may apply. In some cases, you may not be able to use your airline rewards when you want to use them. There may be blackout dates or seating restrictions. You should also know about and understand any redemption fees that may apply.

If you have a particular brand or hotel or airline that you use a lot you may want to see if the company offers a credit card. This is only a good idea if you plan to use the reward points with this company brand. If you are a loyal customer to this brand and truly use the points that you earn this can be one of the most generous programs available.

One issue that you should keep in mind about credit card rewards is that they only really pay off if you pay off your balance on a regular basis. If you do the math on this you will see that the rewards rarely pay off more than what you will have to pay in interest when you carry over a balance.

You will want to see if the credit card imposes any rebate caps. You may find some companies that limit the amount of your benefit either by using a cap on points or on air miles. Some may limit the amount of cash back you can get. Whenever possible try to use a company that has no caps on rewards.

Shop for a reward card that has no annual fee; there are many of these available today. In addition, make sure you look into any expiration dates on the rewards that you will earn. Some companies will expire your points after a certain amount of time.

Lastly, you want to make sure you keep up to date with the company's policies. It is not uncommon for some credit card companies to lower their rebate rates (or increase them from time to time). This information should be available either online or in your monthly billing statement. It may also come as a newsletter within the statement. Take the time to look for it and read it carefully.