The “rewards” a cardholder receives from the credit card’s issuer are presented according to the number of purchases the cardholder makes with the card.The variety of rewards offered by credit card companies is virtually endless, with some of the popular rewards being air miles or discounts off of the cost of certain airline’s flights.Some retailers and stores offer “loyalty” rewards if a card issued in their name is used for purchases, and you can even earn discounts with some cards toward the purchase of a new car.
However desirable some of the rewards offered by some credit cards might be, the question that must be asked is whether or not these rewards are worth it.For the answer to this question, it is instructive to look at the rate of interest applied to purchases made on credit cards with rewards and compare them to those without rewards.There is a great number of 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 interest rate is much more than the zero percent interest rate on the introductory offers of many other credit cards and about 7-8% more than the interest rate of a basic low-interest credit 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 wants to earn sufficient points for worthwhile rewards and have to pay interest at these sort of rates, then it would certainly be worth giving serious consideration toward choosing a much lower-interest credit card which does not offer rewards.The kind of credit card user who pays off their total card balance before the payment due date and never has to pay interest, will actually receive the rewards for using their card for 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.Similar in principle concept to the reward credit card, a cash-back card pays back, in cash, a preset percentage of whatever has been spent on the card each month.
You will be paying an excessive amount for the use of a cash back credit card, if the amount you spend attracts the 19% APR in interest and the current best cash back rate is somewhere around 5 percent on the spent amount.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 if 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.Your personal financial picture may be given a brighter focus when you are using these cards that offer rewards and cash back.
Alisdair Cosgrove is a freelance writer specializing in personal finance. You can read more of his work at www.JSNet.org for credit card comparisons including cash back credit cards and also offers a comprehensive list of credit cards for gas rebates. You can read more about credit cards from his on site article, 'Credit cards safer than checks?'.
