Rewards Cards Are Great For Consumers But Beware The Tricks!

Rewards Cards: Many credit cards offer rewards as incentives to borrowers. These rewards cards can differ depending on the credit card issuer.

Rewards for credit card purchases can be anything from redeemable airline miles, gift certificates and cash back. These rewards cards are all used as incentives to get one to apply for and use a particular credit card.

Credit card rewards are generally issued after the credit card holder purchases an item or service using the rewards credit card. Depending on the type of credit card, redeemable rewards can be valued at .25% to 2% of purchases.

Credit card companies like MasterCard and Visa increase their fees to allow credit card issuers to fund rewards systems. Because of this, rewards cards programs are often a liability to credit card issuers. Often times, credit card issuers that offer credit cards with rewards, will discourage credit card holders from redeeming their reward points.

Credit card issuers who discourage credit card holders from redeeming their reward points will usually ask the credit card holder to call customer service in order to redeem their reward points. In some instances, there are credit card issuers who will hide links on their websites that offer information on redeeming reward points.

Some credit card issuers that offer rewards cards will encourage credit card holders to redeem points valued at a lower cost. For example, the credit card holder will have options of redeeming their reward points for gift certificates instead of more expensive items like airline tickets.

Despite the fact that credit card issuers can discourage credit card holders from redeeming reward points for expensive items, there are some benefits to getting cash back and rewards credit cards.

Common Credit Card Incentives and Rewards:

Balance Transfers: a balance transfer is the act of transferring a debt from one credit card to another. Credit card holders will use balance transfer incentives if a newer credit card has better terms and interest rates (or fees), than another credit card. Balance transfer offers usually consist of three different types of rates. These rates are usually defined as a purchase rate, introductory rate and a fixed life rate. A purchase rate offer usually states that the transferred balance is subject to the same rate as the card’s purchase rate.

An introductory rate offer generally states that the transferred balance is subject to a very low interest rate for a limited time.

With an introductory rate offer, a 0% interest rate is very common, but the introductory period varies from six to 15 months.

After the introductory period, the transferred balance is subjected to the purchase rate of the newer rewards card. With a fixed rate offer, the terms usually state that the interest rate of the card will remain low until the transferred balance is paid off in full.

Balance transfer incentives can be a great way to save on interest rates; however, balance transfers are usually subjected to transaction fees of up to five percent.

Cash Advances: A cash advance reward is the ability to withdraw money from the credit card account balance at an ATM. With this type of incentive, a credit card holder can withdraw cash from the credit card account for purchases in which they cannot use a credit card. Credit card issuers usually charge interest rates on cash advances and these interest rates are usually higher than those of regular purchases . With cash advances, there is usually a set limit on how much the credit card holder can withdraw from the rewards credit cards account.
Gift Certificates: Gift certificates are common rewards given to rewards cards holders. When credit card holders make purchases, they receive points that can be redeemed later on for gift certificates. Credit card issuers generally have certain merchants for which they offer gift certificates. When the credit card holder’s reward points reach a certain number, they are eligible for redemption. The credit card holder will then have a selective choice of merchants in which they can choose gift certificates.
Travel Rewards: Travel rewards are rewards that can be redeemed for things like travel expenses. Depending on the rewards cards, travel rewards can be anything from hotel rates to airline tickets. After the credit card holder has made a significant amount of purchases or earned the minimum amounts of points, the travel reward points can be redeemed.
Cash back: Cash back rewards are rewards that are given to a credit card holder based on the monetary value of the purchases made with the reawrds cards. For example, some credit cards will give a certain amount of reward points for every $1 spent on the credit card. These points can then be redeemed for other gifts or services.


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