Credit Card Reward Types
When people are looking for a credit card, there are a lot of factors that need to be considered. While many people are familiar with how important it is to consider interest rates, annual fees, and penalties, it is also a good idea to take a look at the rewards that the card offers. Credit card companies make money when their customers swipe their cards. Therefore, they will often offer rewards to incentivize the customer to use their card. Of course, like the cards themselves, there are a number of important factors to consider when looking for credit card rewards. Not all rewards are created equally and it is important to find the rewards that best suit your spending style. With this goal in mind, there are several broad categories of rewards that we’ll cover in depth below.
Credit Card Travel Rewards
Credit card travel rewards are among the most popular rewards. Traveling can be expensive and between flights, hotel rooms, and restaurants, there are opportunities for credit card companies to partner with the travel industry to offer valuable rewards to their customers. When considering travel rewards, there are a number of important points to consider:
- Many travel cards will also offer some degree of rewards on everyday purchases in addition to bonus points for travel, sweetening the deal.
- These travel cards will sometimes come with other rewards and perks such as discounts on dining, access to travel lounges at the airport, and even travel insurance.
- Often, travel credit cards are dual-branded as both an airline card and a hotel card, in many cases leading to free nights at hotels.
- Sometimes, these rewards can be transferred to an existing airline account and used as frequent flyer miles, adding to their flexibility.
- There are also a few points of caution to consider. These include:
- Some travel cards have a prohibitive annual fee in excess of $500.
- While many travel cards offer a 0 percent foreign transaction fee, others may charge up to 3 percent.
- There might be blackout dates or other restrictions regarding when the rewards can be redeemed.
- If the rewards are redeemed for anything other than travel, this can diminish the value of the rewards.
![tropical vacation](https://www.peachstatefcu.org/hs-fs/hubfs/Blog%20Images/tropical%20vacation.png?width=765&name=tropical%20vacation.png)
Credit Card Cash Back Rewards
Cashback cards are another popular option for those looking for a credit card. These rewards can be more straightforward and are much easier to understand than some other reward categories. Therefore, this category of rewards has become more popular. If you’re considering a cashback credit card, it is important to keep a few points in mind:
- There are rarely any restrictions on how the cash rewards can be used. Many people decide to apply these rewards directly to their statements, helping them pay their bills.
- Many cash back cards do not have an annual fee.
- Some cards offer a sign-up bonus that is delivered following the first purchase made with the card.
- There are often added bonuses for shopping at certain stores.
There are also a few points of caution that you may want to consider:
- Once the introductory period ends, the APR can go up significantly.
- There are often foreign transaction fees that can make the card prohibitive to use internationally.
- Many cashback cards have a limit on the number of rewards they can offer.
Cashback cards are great for those who are looking for their first credit card with rewards, however, it is also important to find a rewards card that fits your spending habits.
Rotating Rewards
There is a less common category of credit card rewards called the rotating category. Some people might be drawn to this category because of the prospect of higher percentages on certain items they purchase on a regular basis. These cards can be viewed as offering a "promotion" on certain categories of items at various times throughout the year. The high percentage of cashback or points on certain common items such as food, gas, and travel is attractive to many people.
On the other hand, there are some times of the year when people might not purchase the "promotion" regularly enough to receive the benefit. As a result, they might feel like they are missing out on the rewards. They might even feel swayed and buy that item unnecessarily. Furthermore, some cards require you to "opt-in" for the rewards that cycle. If people don't opt in, then they don't have access to that particular promotion. Simply forgetting to do so can cost someone dearly. Keep this in mind when considering a rotating rewards card.
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Credit Card Points-Based Rewards
Another common rewards category involves credit card points. The cards advertise their points in all sorts of ways and the large number of points can make them seem attractive. On the other hand, it is always a good idea to dive a little bit deeper and investigate the true value of these points a little more closely.
- Often, the cards that come with points offer an attractive sign-up bonus that might already be redeemable.
- The points can often be redeemed in a variety of ways across multiple categories.
- There are often opportunities to earn additional bonus points that might come from things such as referrals.
- Credit card points are sometimes transferrable to travel accounts where they can be redeemed as miles.
- Some credit card points allow people to merge the balance with another credit card's point balance.
- Sometimes, these cards have an extremely high annual fee.
- Credit card points sometimes expire, rendering them useless.
- One credit card point is not the same as one dollar, making it hard to quickly and accurately calculate the points balance.
- There may be restrictions on the sign-up bonuses and how the points can be used.
All of these points are important to consider when looking for a points-based credit card rewards system.
Don't Let Rewards Change Your Spending Habits
Finally, those who are looking for a rewards credit card need to remember that the rewards should not change their spending habits. If this happens, people will simply end up spending more money than they should, just to chase down credit card rewards. It is better to find a rewards credit card that aligns with your spending habits, helping you find ways to earn discounts and extra money on items that you already purchase. To find the right credit card, take a look at where the money is going. Then, find a credit card that offers the best rewards in this area.
Peach State offers a variety of VISA® credit cards to fit your life, including cards with rewards!