You will find that there are several credit cards available that offer all sorts of "rewards" which are based on how often the cards are used to make any type of purchase.Some of the most popular rewards are air miles and discounts off the cost of flights offered by certain airlines, however, the variety of rewards that are available is nearly endless.It is possible to earn discount points toward the purchase of a new car, and there are some retailers and stores which give you loyalty rewards for using a card issued in their name.
You should be asking yourself if these rewards are worth it, in spite of how desirable they may be.You can answer this question for yourself by making comparisons between the interest rates on purchases made with cards having rewards and cards that do not have rewards.The lowest rate of interest on these types of cards is usually about 15% APR even though there are several cards that offer some kind of loyalty bonus or reward.A basic low interest credit card has an interest rate about 7-8% lower than the credit cards with rewards and the zero interest rate on many other credit cards is very much lower than this type of card.The interest rate on some of the reward cards can be as much as 30% APR, you will find this out if a comparison of the interest rates on the broad range of these cards is done.
If your credit card is one of those that has these higher rates of interest and you are using it to earn enough points to get the types of rewards you want, it may be a better idea to switch to a lower interest credit card and save money instead of reward points.If you pay off the whole balance on your credit card before payment is due, and so you really never have to pay interest, the rewards for using the card are actually free.You may want to consider the alternate choice of the cash-back credit card if you are not sure you can maintain the discipline of paying off the whole balance of your credit card each month.The way the cash back credit card works, is to pay cash back to the card user in accordance to what is spent on the card each month and this is also the same basic working principal of the credit cards that offer rewards.
Since the best current cash back rate is in the area which runs about 5% and the spending you do on the card attracts around 19% APR in interest, you will unfortunately end up paying quite a lot for the use of the card.You will be able to retrieve for your own pocket the 5% cash back on this card when you pay your total balance each month and avoid the interest charges.
If you intend to maintain a strict personal practice of repaying your balances every month to avoid paying interest, it may be wise to use the credit cards that have cash back and rewards attached to some of them.When used in this way, these credit cards can be very beneficial to your personal finances.
Alisdair Cosgrove is a freelance writer specializing in personal finance. You can read more of his work at www.JSNet.org for credit card comparisons including cash back credit cards and also offers a comprehensive list of credit cards for gas rebates. You can read more about credit cards from his on site article, 'An extra credit card?'.
