It was not that long ago that the only reward anyone seemed to offer or care about was air miles. While air miles cards are still quite popular, there is a vast array of rewards that you can find and get your hands on now thanks to new reward credit cards and they often sound like the perfect deal for anyone. You use your credit card to make purchases and then earn points that can be used for gifts such as iPods or even free vacations.
Remember that not all rewards cards are equally as rewarding, so here are a few important things to consider when weighing your rewards cards options.
Why do you want a Rewards Card?
This is the first question that you need to ask when shopping around for credit cards. Are you enticed by the rewards offered by certain retail stores or do you want to save money on your next big vacation? Whatever it is that you look forward to, you should make sure that your card offers it. Sounds basic enough, but there are many consumers out there stuck with all kinds of air miles when all they wanted was a few discounts here and there. On top of that, if you are looking to gather air miles make sure that your card doesn’t offer limited service to your local airport: that way you can make the most of the benefits your card brings.
Some cards may sound great because they offer double bonus points, but they may only be offered for purchases of clothing or groceries. If you only use your credit card for vacations and gas, then you should look elsewhere.
Read the Fine Print
Always read the fine print when signing up for a rewards credit card. Some rewards cards make it seem like earning rewards is simple, but when you read the fine print, you realize that most rewards are not matched dollar for dollar. For example, you may need to spend $2,000 to receive 500 points, and if you opt for a rewards card that offers gift certificates, you may have to spend $1,000 to get a $10 credit.
While that $10 credit is, of course, better than nothing, reading the fine print will allow you to shop around and find a more appropriate rewards card. Do the math, focus on the details, and you will be rewarded with a better deal in the long run.
Use your Card Often
It is a great idea to use your rewards card as often as you can if you want to receive the most benefits possible. This does not mean that you should be carrying a balance from month to month or start racking up debt, but you should use your card in the same way you would use cash. Use your card when shopping and then head home and pay off the bill right away or before the end of the month. This means you won’t pay any interest, but will also show you how quickly you are capable of racking up points and rewards.
Don’t Lose your Rewards
One of the big drawbacks for people that use rewards cards is the fact that most come with a timeline. Always take the extra time to consider blackout and expiration dates or anything else that could negate the use of your rewards. There is nothing worse than compiling all kinds of rewards over a year only to lose them before you can use them.
In the end, rewards credit cards can be a huge boon to your lifestyle as long as you choose the right one and learn how to use it. If you are going to be spending the money anyway, why not try and get something back for it?
DIY Credit Cards
For as long as most of us can remember, we have been tied down by the control that credit card issuers have over us. Even if you make all of your payments on time, stay in perfect standing with your creditors, and keep your credit score high, you can still be subject to decreases in limits or hikes in interest rates at any time.
New credit card regulations are trying to change all that and help keep good customers protected, but as expected, credit issuers are already bouncing back and working new angles to continue to profit. So be wary about the new offers you are about to receive in the mail, and watch for new services that are aimed to make you think you have full control over your credit card.
Citi and American Express DIY Credit Card
Citigroup began paving the way to meet the new regulations by implementing a program involving balance-transfer promotions that can be customized. This program has been in place since October and gives consumers the chance to set their promotional periods and interest rates.
Late in 2009, American Express began a program called Zync which is marketed to adults in their 20s and gives them the opportunity to customize their reward programs and certain benefits. With the full launch of the card later in 2010 there will be an array of reward packages to select from, while at the moment there are only four.
Discover’s DIY Credit Card
Discover Financial Services has started the turn over for credit issuers by offering a new tool that allows customers to apply for a credit card that they can customize and create to suit their lifestyle and needs. The CardBuilder tool lets you choose your own promotional APR terms, set an interest rate that you choose, design the look of your card, and choose between different rewards programs.
The credit card issuers have released statements noting that the industry is heading to an increased customization trend, and point out that more individualized control is a big benefit for consumers. The real question is whether all this new ‘control’ is really a bonus, or if we are just being marketed the same old services with a new twist.
Citibank and Discover have noted that the increase in options allows customers to make their own decisions and mesh their needs with their credit card.
But as always, we urge you to be focused and prepared to read all of the fine print.
You didn’t think it would be as easy as setting your low rate and picking out the best rewards, did you?
Making personal choices is going to mean you have to give up certain things to receive other benefits, as with anything in life. For example, if you want to choose the option to have 0% annual percentage rate on your transfers, then you have to opt for higher fees on your transfers and a shorter period for the promotion. With Discover, if you want the lowest interest rate, then you cannot even choose any of the promotional offers at all.
It is important to remember that the credit issuers are still in control and that you would be wrong to assume that you can go online and create a credit card all on your terms. In the end, the customization offered is essentially just a smart way of marketing to counteract the new credit card regulations. It doesn’t mean you are getting a better deal; it just means that you feel like you have more options.
What`s even worse is the fact that the increase in options could have a more negative impact in the long run. It is often a psychological trait for people to be willing to pay more to get just what they want. This means that credit card issuers will try to keep offering even more services and to convince you that they fit your tastes and your budget.
An increase in options is inevitably confusing and decreases your odds for choosing the options that are more beneficial for your finances.
If you decide that a do it yourself credit card suits your style, then, by all means, take advantage of your options. Just make sure that you always weigh the pros and cons of every decision and make the choice that not only benefits you in the short term, such as rewards and bonuses but also saves you money in the long run.
Solid personal finance doesn’t come easily or without a concentrated effort on your part, so try your best to look ahead and analyze how certain credit card options can affect your future.