Most Of Us Can Use Credit Card Rewards

Jan 4, 2009 Credit Advice

When credit cards offer “rewards” to their cardholders, this is done according to the number of purchases the customer makes with the card. The variety of rewards offered by credit card companies is virtually endless, but some of the more popular rewards are gas credit cards, air miles or discounts off of the cost of certain airline’s flights.Some retailers and stores offer “loyalty” rewards when a card which was issued in their name is used for purchases, and you can even earn discounts with some credit cards to put toward the purchase of a new car. 

You should be asking yourself if these rewards are worth spending money in order to obtain them, in spite of  how desirable they may seem to be.If you make a comparison of the interest charged on purchases made with the cards that have rewards and the ones that do not, you can easily answer this question for yourself.Even if there are many credit cards which offer rewards or loyalty bonuses, the lowest rate of interest on these cards is most often around 15% APR.

A basic low interest credit card has an interest rate which runs about 7-8% lower than the credit cards with rewards and the zero introductory interest rate offered on some of the other credit cards is very much lower than this type of card.When you do a comparison of all of the interest rates on the whole range of credit cards, it will show that some of them exceed over 30% APR.

If you are a regular credit card user who earns some rewards by paying interest at these kinds of rates, it may worthwhile for you to consider choosing a much lower interest credit card which does not offer rewards.If you pay off the whole balance on your credit card before payment is due, the rewards for using the card are actually free because you are not paying interest then.

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 cards.Similar in principle concept to the reward credit card, a cash-back card pays back cash equivalent to a preset percentage of whatever has been spent on the card each month.     

Since the best current cash back rate is in the area of 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.The interest charges can be avoided and the 5% cash back can be put into your own pocket, if you are one of the consumers who is in the habit of paying all of your outstanding balances each month.   

It can certainly be worthwhile to you, when you use the cash back credit cards and those that offer rewards, if you keep paying your monthly outstanding balances consistently and avoid the interest that will be charged.When used in this way, these credit cards can be very beneficial to your personal finances.

Tags: cash back credit cards, credit cards, gas credit cards, reward credit cards