Information Center – News and Articles about Credit Cards
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‘Reward' Yourself with Smart Credit Card Applications
The old saying goes, "Don't put all your eggs in one basket." It means you shouldn't put all your hope (or money) into one thing, because if it fails, you'll have nothing left. Investors are warned against buying all their stock in just one company. But when it comes to credit cards with rewards programs, putting your eggs in one basket is the smartest thing you can do.
Think about it: You earn rewards on these credit cards by spending money. For every dollar spent, you get a certain amount of points or cash back. Earn enough points, and you get a prize. So it makes sense to do all your spending with that card, right? That way you get those rewards faster.
One credit card survey showed that cards offering cash back and other rewards now comprise one-third of all new credit card applications in the USA. People love the idea of getting something in return for spending all that money, and the credit card companies still make plenty of income through finance charges, late fees, and so forth.
Banks and other financial institutions have reached out to a vast multitude of companies and arranged deals with them for discounts on plane tickets, hotels, rental cars, travel expenses, and retail items. It's beneficial to the companies because their products are promoted and mentioned by the credit card companies. And the consumers love the perks they get!
Credit cards with "rewards" programs and those with cash back operate on the same basic principle -- giving the customer something back -- but they're a little different in how you get your benefits, and what form those benefits take.
On its most basic level, a cash-back card gives you cash back -- usually 1 percent -- on every purchase you make that qualifies. Sometimes ALL purchases qualify; sometimes it's specific, such as when banks issue credit cards in conjunction with particular gas stations, and the cash back you earn can only be used on gasoline purchases.
To figure you what kind of rewards or cash-back card is best for you, spend a few minutes looking at your spending habits. If you tend to carry a balance from month to month on your credit cards, a rewards card probably wouldn't be good for you. Why? Because rewards cards don't usually have low rates. The higher interest rates would cancel out whatever benefits you were getting from the rewards. You'd need to compare credit card offers to find the absolute best rewards card -- one that offers rewards AND has low rates.
Then, think about what form you want your rewards to take. In general, you get one "point" for every dollar spent. You rack up enough points, you can redeem them for particular prizes or discounts at retailers.
In some cases, the card is very specific about where you can shop and use those points. For example, the Bank One Amazon Credit Card lets 2,500 points equal a $25 gift at Amazon.com -- and only Amazon.com.
So an important element here is looking at what good credit card offers are available, and where you'd be able to use the rewards points you earned from them. If you never shop at Amazon.com, then the Amazon card would be useless to you except as a regular ol' credit card. You don't want to accumulate a lot of these rewards cards, either. One should be plenty -- you're putting all your eggs in one basket, remember? You want to earn those points quickly!
Keep in mind also that the credit card companies can change their plans any time. It's smart to use your rewards points as soon as you get them. If the card's membership plan changes, your old points might be useless.
Once you've got your rewards card, just use it the way you normally use a credit card. Every dollar you spend is earning you valuable points. Don't overspend, though: Remember those monthly finance charges! Don't let the interest rates negate the value of your rewards points.
And don't expect results too soon. It takes a while to build up enough points to get anything noteworthy. A plane ticket, for instance, usually requires 25,000 points -- that's $25,000 spent. It will probably be at least a few years before you've done that kind of damage at the mall! Airlines are notorious for restrictions, too, with blackout dates and so forth. Be prepared for that when the time does come to cash in your rewards points.
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