Reward or Cash Back Credit Cards:
Maximizing Your Returns
by Joseph Kenny

If you are one of the lucky customers who pays off their entire credit card balance in full each month, then interest rates will not be of much importance to you. You pay no interest as you never carry any balance over from month to month. What may be of more interest to you is the loyalty or reward schemes that various credit cards offer and therefore you should be deciding on which card to choose based on this information.

Pay an Annual Fee For Better Rewards?

Some credit cards charge an annual fee and they justify this by referring to the great reward schemes that they offer, but do your homework. It may be surprising to learn that many of the best reward schemes are from cards that do not charge any annual fee and in any case, you typically have to spend over five thousand pounds before the reward scheme will have paid you back your annual subscription fee. If you are being charged an annual fee for your credit card, compare and then consider switching credit card providers.

I Just Want Cash, Now!

There are generally two types of reward scheme. There are cash back schemes and points schemes. Cash back schemes are generally preferable as you are not limited in what you can get for your reward or where you have to spend it. If you are given back cash you can do whatever you like with it and don’t have to spend it on a new toaster or other such gift that you can usually cash in your loyalty points for. As well as cash and points, you may also be rewarded with air miles or any other collectible reward.

Reward Points Credit Cards

As well as satisfying yourself that the reward is something that you can actually use, you should find out how much you are rewarded for using the card. Some reward schemes reward as much as 5% on all spending in the US, while in the UK the highest found rate was 2%. Others are closer to 0.4% rewards on all your spending. The difference, as you can clearly see, is substantial.

Maximizing Your Gains

Loyalty rewards have been criticized by some consumer protection groups, as well as Which magazine on the grounds that they distract customers from getting the best deals on credit card interest rates and make them put up with worse terms in exchange for meaningless points.

Applying For a Credit Card That Suits You

There are so many good credit card deals on the market at the moment and there are probably as many, if not more, bad credit card offers. The trick is to find the best deal. If, as noted earlier in the article, you pay your balance in full every month them either rewards or a cash back credit card is a good option.

A cash back credit card application is relatively simple, find the deal with the highest cash back (based on your spending level) deduct costs such as annual fees and you have the potential ‘cash back for that particular term. The next step in choosing a rewards credit card is to identify what type of rewards interest you, if you are an avid golfer then I suppose you will not be applying for a football card! Analyze the rewards, costs, spending and return of the card to find the best deal. This can be more time consuming than applying for the cash back offer, but there are rewards credit cards available that can be, if you pardon the pun, ‘more rewarding’ than others.

For most people a card with good terms and good interest rates is still more important than rewards and if this is the case for you, don’t let the rewards put you off.

Joseph Kenny is the webmaster of http://www.creditcards121.com, an online comparison site for UK residents. For US residents he recommends http://www.credit-cards-info.com for all your credit card needs.

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