Rewards Credit Card

Rewards Credit Card

Rewards Credit Card

From merchandise and cash back to travel incentives and charitable contributions, a rewards credit card provides cardholders with an added benefit in exchange for their spending. While the rewards can be attractive, there are a few caveats to consider:

Spend wisely. Never make purchases with the sole intent of earning rewards points. If for some reason you are not able to pay your balance in full at the end of the month, the value of the earned points will be more than offset by the amount of interest you'll have to pay. Paying $20 in interest to earn a $5 incentive is not a reward.

Avoid excess fees. When comparing rewards cards, be sure to closely examine any associated fees. High annual fees, over limit penalties, or late payment fees could more than wipe out the value of any rewards earned.

Know the value of a point. For most rewards credit card issuers, one dollar equals one point. However, to make a savvy comparison, you must dig deeper and determine the actual dollar value of each point earned. For example, one issuer may dictate that the dollar value of one point is equivalent to 50 cents, while another may determine that a point is worth only 5 cents.

Be mindful of limitations. Be sure to investigate point caps and expiration limitations. If you're a big spender, opt for a rewards card that will provide your full entitlement. If you tend to spend more conservatively, choose a card that will allow you to save up your points for a bigger reward.

Understand the redemption process. Typical rewards include travel and air miles, discounts for retail goods, cash back incentives, and charitable contributions. Be sure to select a rewards program that makes it easy to redeem purchases of goods and services you would otherwise buy with cash.

Read the fine print. As with any Aussie credit card, it's essential that you understand the stipulations associated with your rewards program. Be mindful of the card's interest rate, associated fees, and reward structure. Also investigate any potential penalties, such as forfeiture of points for late payments, black out travel dates, point caps, and expiry.

Selecting a rewards credit card can be a daunting task, but the payoff can be big if you research and choose wisely. With today's simple and secure online applications, there's no need to wait for your first reward.

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