All credit card rewards programs are not the same. From cash back to travel miles, there are several ways you could choose to make the money work in your favor. The credit card industry is so huge and competitive that card issuers often offer their customers rewards as valuable points, cash back or miles. For a few users, it could look like a good ploy to utilize a card that brings in cash back and have those proceeds dedicated to savings accounts. However, this is easier said than done. If you’d like to make these credit card rewards programs work in your best interest, head over to The Points Mom site to learn about choosing the right credit card, card rewards, and the latest offers and finding the credit card rewards programs with the most introductory points.
The Saving Potential
First, credit cardholders must learn how the cash back comes in and how the savings could be utilized. For instance, some cards would issue cash back benefits automatically as statement credits to accounts. Therefore, in such cases, cardholders are basically getting savings on their shopping as lower bills.
Therefore, to dedicate the rewards to investment or savings accounts, cardholders must transfer money that’s equivalent to the total rewards earned, to their investment vehicle or savings account from their current bank account.
Carrying a Balance
A potential problem with rewards credit card usage arises when buyers carry a balance. Those consumers carrying a credit card balance are being charged an interest sum every day – the associated costs would reduce any earned rewards. Also, credit card interest rates are much higher than interest rates most individuals could expect from investments. Therefore, people with credit card outstanding sums would be better off paying the balance off or redeeming rewards in the form of statement credits, and not investing the rewards available.
Lastly, individuals who are facing issues controlling expenses and not being able to avoid the debt trap aren’t the ideal candidates to be rewarded for creating extra credit card fees, even if the rewards get ultimately dedicated to savings. The perfect cardholder for such kinds of products would be someone who clears credit card balances every month in full. However, these people find it difficult to contribute money to their savings accounts. Such cardholders would fancy how their investment accounts and savings grow depending on their card usage – all of this without having to make any efforts on their part.
Experts often suggest users to stay away from rewards card that entail an annual fee obligation. There are simply too many good rewards cards sans such fees. The fee setup is ideal for individuals who are heavy and frequent card users. A free card is always the best resort if regular usage is not on the cards.
Cash Back and Not Travel Miles
Within the credit card rewards domain, a couple of primary incentives tend to pop up as favorites: cash back and travel miles. But often, taking cash home is a much better ploy, and the following are the reasons why.
Many cards offer a percent as cash back – that means a percent of all the spending. There are some cards offering cash back as high as 1.5 percent. And then there are multiple special deals that fetches you, for instance, 5 percent cash back on a three-month grocery purchase, or a 3 percent cash back for a three-month gas purchase.
Miles, on the other hand, aren’t so simple. The major problem being the plethora of restrictions attached. For example, there could be black-out phases around or during holidays. Miles passengers often get designated limited seats by most airlines. This means the vacant seats aren’t up for long.
When insisting on travel rewards, choosing travel points instead of miles is recommended. They’ll generally be only a few – you’d have limited tickets for the points – but blackout periods won’t be there and you could use them on different airlines.
Are Credit Card Rewards Worth?
The hassle associated with credit card rewards programs is totally worth it, particularly if you love to travel a lot. For others, the benefits may be negligible or may not exist. It is imperative to learn that a few rewards could be tougher to earn and reclaim compared to others.
Airline miles , for instance, are quite difficult to reclaim throughout the year, and could be close to impossible to encash unless your dates of travel are fairly flexible. On the contrary, hotel loyalty points are simple to earn and reclaim, particularly if you’re fine booking a hotel stay several months in advance. If you’d like to start the rewards journey, but are concerned over the hassle, it’s advised you pick rewards that can be easily encashed – at least in the beginning.
That said, cards offering travel credit or cash back are among the simplest to work with. The unique feature of this card is the fact that redeeming the miles earned isn’t restricted to any particular airline or expenditure. The redemption could be done on any mode of travel, regardless of you choosing to spend on airfare, hotel stays, train tickets, etc. Such level of flexibility makes such points quite easy to redeem.