How Rewards Credit Cards Work
Rewards credit cards are credit cards that offer different types of rewards as incentives for using their card. This is done because the credit card industry is very competitive and companies that provide credit cards compete with each other for customers. If you’re wondering how rewards credit cards work, read on.
Types of Rewards Credit Cards
There are different types of rewards that may be offered when you make purchases with a rewards card, all of which are provided as a benefit of using the credit card. Types of rewards include:
Using rewards cards gives you a chance to get extra value from routine spending. However, be careful not to overspend just to earn rewards.
Tiered Vs. Flat Rewards
Rewards may be either tiered or flat. Those that are flat have the same level of rewards no matter where you use them, such as 1% on all purchases. Tiered rewards offer a different percentage on different types of purchases such as 3% on gasoline and 2% on groceries. There may be caps on how much you can earn.
Choosing a Rewards Card
The best rewards card is one that goes along with your typical spending habits. If you use your card frequently at restaurants and you get cashback every time you use it at a restaurant, that might be a good choice for you. If you’re a frequent traveler, earning points that you can use when you travel would benefit you. However, watch out for annual fees. While not all rewards cards have an annual fee, some of the ones with the best deals do, which may end up erasing the benefit of the rewards.
Qualifying for a Rewards Card
When the value of rewards being offered is high, it may make it harder to qualify for a particular card. Take care of your credit by always paying bills when they are due and avoid borrowing more than you can afford to pay back. Check your credit report periodically to make sure there isn’t any incorrect information being reported since errors on your credit report can damage your credit.
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