With some exceptions and often up to set restrictions, rewards credit cards provide you some kind of "reward" for each dollar you spend, usually in the form of cash back, points, or travel miles. You can then apply your benefits in a number of ways, depending on the card.
How Reward Credit Cards Work ?
Today, rewards cards account for a sizable percentage of the credit card market and appear to have something to offer everyone. The cards differ in terms of how your rewards can be redeemed as well as what categories of items they can be used for, in addition to varied reward schemes.
In most cases, you can exchange your points for checks, statement credits, gift cards, products purchased directly from the card provider, travel benefits, and/or statement credits. On your credit card statement, which appears at the conclusion of each payment cycle, you can view your current rewards balance.
Many credit card issuers also provide welcome bonuses in an effort to sway you into applying. When you meet a set spending criteria, these offers may include hundreds of dollars in rewards in addition to an initial 0% APR for the first few months and no fees for the first year.
How To Compare Reward Credit Cards ?
The following are some crucial factors to think about when looking for a rewards credit card.
Fees per year: Although many of the more profitable rewards credit cards do, not all of them have annual fees. Therefore, it's crucial to consider the expense of any yearly charge against the worth of the advantages you anticipate obtaining throughout the course of the year before enrolling. If you don't spend a lot of money, paying the several hundred dollars in yearly fees that some high-end cards impose might potentially cancel out your incentives.
Costs of borrowing: APR promotions with 0% introductory rates are common on reward cards. You will, however, be charged interest if you don't pay off your balance in full each month after that. The interest rates on reward cards can be high, frequently ranging from 15% to 20% or more, and they can quickly mount up if you keep a balance. Therefore, interest fees can be more expensive than any perks you receive from your card, similar to a high annual cost.
Fixed rewards versus tiers of compensation: While some cards have fixed reward structures, others have tiers. Tiered cards provide varying degrees of incentives for various kinds of transactions. For instance, a tiered card might award 3 points for each dollar spent on petrol but just 1 point for each dollar spent on groceries. Fixed cards, on the other hand, always offer the same degree of rewards, wherever they are used. 1% or 1.5% payback on all purchases, for instance, might be offered with a set rewards card.
Spending limits on cashback: The amount of cashback points you can receive in some of the most lucrative spending categories is typically capped by the credit cards that offer them. For instance, a card might offer 3% cashback on the first RS. 1,25,000of your quarterly grocery spending, but just 1% on any further purchases made in that category until the start of the following quarter.
How to Find the Best Rewards Credit Card for You
No incentives programme, regardless of how great it may seem, is appropriate for everyone. Your specific circumstances will determine a lot. You should therefore take a few extra measures before you begin applying.
1. Examine your financial practices.
The greatest rewards card for you will be one that capitalises on your regular purchasing patterns—without requiring you to alter your routine merely to pursue rewards. Do you, for instance, spend a significant amount of cash each month on groceries, petrol, or dining out? If so, the best option for you might be a card that offers additional benefits in those categories.
You're a frequent flier, right? If so, your best option would be a credit card that rewards travel-related expenditures and lets you use your rewards towards additional travel. Similar to this, a co-branded rewards card issued in partnership with that business can make sense if you purchase the majority of your clothing, home products, or lodging there.
Likewise, think about your overall spending. If you only use your credit cards for RS.83,000 or RS.1,66,000 a month, a card that demands RS.12,46,000 in spending during the first three months in order to get a sizable introductory bonus won't be of use to you. (Worse still, it can motivate you to spend excessively!) In this situation, search for a credit card with a lower spending requirement and, most likely, a lesser sign-up bonus.
2. Examine your credit rating
To be approved for a reputable rewards card, you must have a strong credit score. It normally requires a credit score of at least 670 to be eligible for a rewards card, one of the three major national credit reporting agencies.
(Secured credit cards might be an alternative for those with weaker credit scores. They now include reward schemes for certain of them.)
As a result, before applying for a rewards card, check your credit score and keep in mind that if you have a short or bad credit history, the cards with better advantages and higher spending restrictions may be out of your price range. A lot of credit card applications can also lower your score.
Conclusion
Although there are many reward cards available, choosing the best one for you may need some investigation. If you need some assistance, Investopedia regularly updates its lists of the top rewards credit cards for different user categories. Remember that you may desire multiple rewards cards as well. You can discover a set of cards that maximises the value of all of your purchases by combining travel, rewards, and cashback cards.
