Some Facts About Credit Card Rewards

When credit cards offer “rewards” to their cardholders, it is done in connection with the number of purchases the customer makes with the card.The credit card rewards offered come in an almost endless variety with some of the most popular ones being air miles and discounts off the costs of flights.Many stores and retailers also offer “loyalty” rewards if you are using a credit card issued in their name and some credit cards will give the opportunity to earn discounts on the purchase of a new car.  

As desirable as these cards may seem to be, it is still necessary to question whether or not they are worth it.In an effort to answer this question it is helpful to compare the rate of interest charged on purchases made with cards that offer rewards with those that do not have rewards.There is a great number of rewards credit cards that offer some sort of reward or loyalty bonus, but the lowest rate of interest on these cards is likely to be in the area of 15% APR.This is about 7-8% more in interest than you would pay for a very basic, low-interest credit card and infinitely greater, of course, than you would be paying on the zero-percent rate of interest on the introductory offer with many other credit cards.Across the whole range of reward cards, the interest rate comparison becomes even more alarming, with some interest rates exceeding well over 30% APR.

It may be worth reconsidering the choice of a credit card that has a lower interest rate and no rewards, if you are a regular credit card user who has to pay these higher interest rates in order to earn sufficient points for desired rewards.If you pay off the whole balance on your credit card before payment is due, and so you really never have to pay interest, the rewards for using the card are actually free.If you are not sure if you can maintain the discipline of paying off the total balance on your credit card each month, then an alternative worth considering is the cash-back credit card.The cash back credit card pays back in cash, a certain percentage of what has been spent on the credit card each month, and this makes it function quite in the same nature as the reward credit card.      

Since the best current cash back rate is in the area which runs about 5% and the spending you do on the card attracts around 19% APR in  interest, you will unfortunately end up paying quite a lot for the use of the card.You will be able to retrieve for your own pocket the 5% cash back on this card when you pay your total balance each month and avoid the interest charges.    

If you intend to maintain a strict personal practice of repaying your balances every month to avoid paying interest, it may be wise to use the credit cards that have cash back and rewards attached to some of them such as gas credit cards.It could be of benefit to your finances to use the credit cards that offer cash back or rewards and you consistently repay the balances on them each time to avoid the interest charge.