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All about Rewards Card

Rewards cards come in three main varieties and one is a cash-back or fixed-value card. These have a straightforward and clearly defined benefit accrual. They’ll usually give one point and sometimes a bit more for every dollar you spend. In addition to travel related redemption’s, these cards offer a wide selection of merchandise purchases through companies such as ScoreCard Rewards. Plus, they can offer cash back paid directly to you on a monthly, quarterly or annual basis. Cash-back card values are about the same but you can use the money for anything. Remember, the ratio is the same. With a $1,000 in charges to the card, you can purchase $10 worth of merchandise. Both require frequent use to meet financial goals.

The second type is the co-branded credit card, and which aligns with hotel companies and airlines. The benefit here is that you earn points for their loyalty programs, and some of these programs are extremely lucrative. In addition to frequent flyer miles, these cards often have added benefit such as elite club membership, special hotel rates, special event packages, priority boarding, and free baggage check.

The third type is the card with a transferable points program. These give you the best of both worlds. You can redeem points for any flight, and you can also transfer points to a number of airline and hotel loyalty programs. Most of these programs also allow you to redeem points for cash. For the flexibility of using points in a variety of ways, these cards often carry annual fees, some quite high.

While there are any number of reasons for using rewards cards, several basic considerations should be explored before a decision is made. The starting point for anyone should be to define the reason for wanting a rewards card. Ask yourself what you want it do that your traditional bank card doesn’t offer. Be specific as to what the card will offer you personally and how often you’ll use it.

Frequency of use is an important consideration in choosing a rewards card. If you’d like one to use for travel but you’re only an occasional traveler, a rewards card may not be for you. As example, for $1,000 charged to the card the rewards point value equals 1,000, and this equates to a $10 value. It takes a lot of purchases to build enough points for a hotel room, let alone an airline flight.

Another decision to make is knowing how many cards you want. Ask yourself whether you can handle keeping track of multiple credit cards at the same time. Consider whether you’ll need more than one co-branded card to match different airlines. Generally, only people who travel often or fly often gain worthwhile benefit from multiple cards, especially co-branded ones.

Starting with a single card buys time to develop a system for staying organized and tracking points, spending requirements, annual fees, and so on. List on paper the points and/or miles you really feel that you can build using a card on a regular basis. List specific perks that you may receive from the card, such as elite travel status, hotel comp’s, free luggage check, and other bonus programs. Then, simply ask yourself if these are important to you.

Rewards cards are both popular and used by millions of people. But, careful consideration should be given before choosing this path, as they often carry higher interest rates or annual fees. Monthly balances must be paid in full for the cards to make financial sense. For many people, cash-back cards, co-branded cards, or transferable point cards make good sense and pay personal benefits for the holder. Follow the guidelines suggested here and you may find a rewards card is a good fit in your financial life.