Imagine that you signed up for the latest credit card offer sent to you in the mail, wanting to take advantage of the appealing, lucrative rewards program. After all, you certainly spend enough to earn countless air miles, and a little holiday would be a nice reward indeed. But you pause just before signing on the dotted line. Is this rewards program really worth it?
Credit Card Rewards Differences
Most consumers know there are substantial differences to credit card rewards programs. There are cash-back rewards, airline miles and gift redeemable rewards programs. Each appeals to consumers in a different way.
Those who travel often will get the most bang for their buck by choosing airline miles or discount fares. Others who do not travel frequently will but rely on their credit cards for regular, everyday purchases will get the most out of cash-back rewards. Consumers who use their credit card sparingly might find gift rewards the best fit. The point is that your lifestyle and spending habits should dictate your choice of credit card reward program, if you choose to use one at all.
The Truth about Credit Card Reward Programs
As with any enticement offered by banks and credit unions, there’s a reason credit card issuers dish out these rewards programs. It’s not just because of their good nature or to spread goodwill among mankind, it is yet another tactic for separating consumers from their money.
Banks and credit unions offering credit cards with rewards are counting on the likelihood that some consumers will overspend to reach their goal of earning those rewards. They are making a calculated bet that consumers will spend more to get more rewards. And that isn’t a good financial strategy for consumers!
The Rewards Game
Sure, spending money to get money back doesn’t sound like a bad idea. It’s almost like paying less for the same item. But those purchases may not equate to eternal rewards as and when you want them. Consumers should read the fine print. That’s where expiration limits and other important conditions are to be found.
Not only do the points eventually expire, making redemption impossible on outdated reward points, but what about other expenses? Even if a consumer spends enough to get a free round trip airline ticket , what about their accommodations or travel insurance? Will those same reward points put extra cash in your pocket to spend while on holiday? Then there’s the cost of meals and car rental – the list goes on. What seems like a good deal might not come to fruition when all the extras are tallied-up.
Cash back rewards may likewise be less of a great deal that they seem at face value. The amount a consumer gets back may be dwarfed by the related credit card interest payments.
Do your research and choose wisely; you could use an online comparison tool to determine which rewards program is the best fit for you personally. You might find several or just a few. If you decide to apply for a reward credit card, be sure not to base your decision solely on the rewards but also on interest rates and fees.
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