Getting to know the basics of credit card rewards

Thursday, October 7th, 2010
Updated: October 7th, 2010
The content is accurate at the time of publication and is subject to change.

Although credit cards rewards programs have huge benefits, there are certain hidden costs that negate all the savings and rewards that are offered. Each credit card has its own unique reward programs and each reward will benefit different customers in different ways. For instance, a person who travels extensively will benefit from the travel rewards and the travel rewards credit cards would be far more valuable than for someone who travels just occasionally. Hence it would be wise to do an evaluation as to which card offers would be ideally suited for an individual.

The first point of consideration is the interest rate. Cards that have rewards programs carry a higher rate of interest than those that don`t and sometimes the interest rates could be double. Even in cases of regular payments and leaving no balances on the card, the interest rate could still be high in case of unavoidable circumstances where a part of the balance is due.

The second point to take note of is the account fees. Rewards credit cards normally charge account fees also. These account fees will usually occur as higher transaction fees, annual fees that are more than average, fees on foreign transaction, or an increase in fees with regard to balance transfers. It would be worthwhile to consider the excess charges and then take a relook and try and figure out if the excess charges outweigh the benefits in terms of rewards.

Next is the value of the rewards, as the reward in itself varies from one card to another. While some cards may offer rewards on a spending of about $5000, there could be another card offering the same reward on a spending of about $50,000. While this could be overlooked in case the fees and the interest charged is less, but this cannot be overlooked if all the other charges are also on the higher side.

In case of redeeming the rewards there is a fee charged for the reward redemption also. While a percentage of the reward value may be charged as the redemption fee in some cases, in others the various cost factors such as shipping charges etc could be on the higher side. This could in turn negate the value of the rewards itself. So, one has to consider these things carefully before redeeming the rewards. In case the issuer fails to reveal all these hidden costs or charges, then in all probability the terms and conditions could be disadvantageous to the card holder.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

Latest Credit Card Rewards News

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If you are lucky to own one of the Discover cashback bonus credit cards i.e. the Discover it® Cash Back, the Discover it® Balance Transfer, the Discover it® Student Cash Back or the NHL® Discover it® credit card, you most probably know that May brings the beginning of activating the 3rd quarter 5% cashback bonus category. But are you hip to the latest news about the categories update?

Thursday, April 25th, 2019

On April 22 the Canadian direct bank Tangerine Bank introduced an improved sign-up bonus offer for their no-annual fee cash back credit card – the Tangerine Money-Back Credit Card. Founded by ING Group in 1997, Tangerine Bank was acquired by Scotiabank in 2012 and now besides the Mastercard cash back card offers savings and chequing accounts, mutual funds and mortgages.

Tuesday, February 19th, 2019

Capital One cardholders have a great opportunity to get cash for miles earned with the Venture Rewards or the VentureOne Rewards cards. The advertising says: “Just pick up and go.” And in fact, Venture travel rewards cards make it easy to earn unlimited miles and redeem for any recent travel purchase.

Tuesday, September 25th, 2018

The inaugural J.D. Power Credit Card Satisfaction Study found that when it comes to choosing a credit card, it’s all about rewards. But just offering rewards isn’t enough: cardholders have to understand how to redeem them, as well.

Thursday, August 16th, 2018

Travelers will be able to collect more points and take advantage of more special features with the new and improved Southwest Rapid Rewards Priority card, which is offering a limited-time introductory bonus of up to 65,000 reward points. This is more than half the points needed to get a companion pass, once they’ve spent the required amount on the card.

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