Costs and Benefits of a Reward Credit Card Offer

It is becoming more common that the best credit card companies are offering rewards cards in order to attract more customers. You see the best credit card offers like this all the time. These credit cards offer cash back and reward points that can be exchanged for such things as airmiles, hotel stays and merchandise.

These top credit card offers may be appealing to the consumer simply because of the rewards involved and because of perks like instant approval, low rate products, and fee free products, but they may not be the best choice.

Basically a rewards card is one that is a general credit card but gives you a chance to get some reward when you use the card. When using the credit card, you can earn points whenever you purchase something. The amount of points depends on the amount of what you are charging. You can then redeem the points for such things as airmiles and merchandise. Many of these cards come with other rewards at the time of the offer like guaranteed approval or online instant approval.

Credit cards that have rewards options are popular among consumers as around half of all top credit cards offers come with some type of rewards according to Mintel's Compermedia's direct mail research. Around 80% of these rewards cards come fee free, and most come only for those with excellent credit. But they generally come with a higher annual percentage rate (APR). Generally the APR rate for a reward card is 14%. This percentage is higher by 4 points than the usual non-rewards card, according to online payment credit card researcher CardWeb.com Inc.

Because of this fact, many experts caution consumers to compare best credit card offers before they sign up for an online credit cards offers that come with rewards or standard credit card offers. Those with rewards require you may pay more for the card than the rewards you receive. As an example, you may carry a high APR and pay hundreds in interest when the rewards you receive are worth much less. You may be able to buy what reward they give with the money you save with a low rate and have money left over.

Weighing the Costs and Rewards

In order to get the most out of your rewards credit card, you should be sure that the card will give you the best value and will be used that way you intend to use the credit card. If not, you can pay more than you need to be depending on your APR and monthly balance.

A good example is with the popular airmiles rewards cards. These cards, usually with top names like Citibank, American Express, or MasterCard , will give you one mile for every dollar you spend on the card and extra miles for using the card for purchases with airlines and companies affiliated with the card. Generally these cards are not fee free, and have yearly fees that range from $50-$150 and APR's from 15%-18%, according to CNN/Money.

Cards such as these are popular for frequent travelers, and people that use their card often. These cards are good for these people, but if you do not fly often or use the card often, it is better to get a type of reward card that offers cash back.

This is why: Generally it takes 25,000 points to earn a free ticket for travel within the United States, and the everyday person will spend around $5,000 on their credit. With these figures it will take 5 years to get a ticket. It should be noted that 60% of people that hold cards carry over their balances, according to CNN Money. These carryover balances can bring interest charges that will nullify the rewards value of your credit card and have a lasting impact on your credit score.

You should watch out for rewards cards that will offer a higher cash back rebate of 5%. These types of reward cards usually have a higher interest rate as this may make it so the reward cards are not a good deal if you carry a revolving balance even when adding the higher cash rebate amount.

What Reward Card to Choose?

You may get the best new credit card offers in the mail everyday, and deciding which ones to choose can be tough. According to the Wall Street Journal, points rewards cards are the better deal. Generally with many cards that give cash back you will get $250 back after spending $25,000. But with a card that gives points if you spend the same amount of $25,000 you will usually receive a free airline ticket that can be worth as much as $500.

The following cards may give you the most points and have the fewest fees associated with them: American Express Blue, Chase Bank Perfect Card, Chase Bank Travel Rewards® Card, Bank One Disney's Visa®, and Bank One Flexible Rewards Select Visa®.

Getting the Maximum Value from Your Rewards Card

To help you get the maximum value from your reward card consider these tips from the Wall Street Journal and other experts.

As you're sorting through the best credit card deals, try to find rewards cards with several reward options. This will allow you to be flexible when you exchange the points for merchandise.

Compare best credit card offers online to save time. Look at cash back cards as well as low rate cards, traditional rewards cards, and fee free cards, as you never know which one of the top credit card offers might work out best for you.

Quickly spend the rewards points you get. It is better to spend the points quickly as the credit card companies can change or downgrade the reward offers at any time. If you are saving up the points, and the offer changes, you will not be able to do anything about it.

To avoid paying higher interest fees, only sign up for a rewards credit card if you will pay off the balance every month.

Only sign up for one rewards card at a time. The more cards you have means that you are not getting the maximum amount of points, and it can hurt your excellent credit. To get the most points possible, only use one rewards card.

With some cards, a lot needs to be spent on the card before you are eligible for the full rewards program.