What is a Rewards Credit Card?
A rewards credit card is a card that offers consumers rewards for using the card. Each time card users use their cards for certain purchases, they earn rewards. Some cards reward consumers for every purchase they make, others reward people only for purchasing certain items, which can change throughout the year. Credit card companies offer consumers rewards as an incentive for consumers to use their cards instead of a competitor’s card.
What Rewards are Typically Offered?
There are three main rewards that rewards credit cards typically offer: cash back, airline miles and points. Cash back rewards cards allow consumers to earn a set percentage of the money they spend on the cards back at the end of the month. The percentage is typically between 0.25 percent and five percent, depending on what consumers purchase. Other cards allow people to earn airline miles, which they can redeem for plane tickets to travel to any destination of their choosing. Points rewards credit cards allow people to earn “points,” which they can trade in for merchandise or benefits.
What Are the Benefits of Rewards Cards?
Rewards credit cards reward consumers for the purchases they make. The best cards charge consumers no fees; they just pay consumers free money for using them. Rewards credit cards are a great way for people to earn extra cash or airline miles for free.
What are the Drawbacks of Rewards Cards?
Rewards cards often tempt consumers to spend more than they would otherwise so people can earn more rewards. If people spend more than they would otherwise, they waste their money to earn rewards that are worth a fraction of what they cost. Plus, if people are unable to pay back their balances, they can end up paying the credit card company significantly more in interest than they earn in rewards.