08/ 13/ 2008
by Debbie Dragon
Many credit card companies offer a rewards program to compete with their competitors for your business. An incentive program is designed to get you, the consumer, to spend more money on your credit card in exchange for rewards like cash back, travel incentives or merchandise.
Not all cards offer the same incentives or rewards. The ideal return is one point for each dollar spent (or mile flown if you are saving airline miles). The thing to keep in mind is that what is ideal and what is real in the world of credit card rewards programs are often two very different things. Rewards programs vary from one carrier to the next, so what can you do to ensure you're getting a good deal?
When you are shopping for the latest electronic technology, what do you do? If you are a truly savvy consumer, you will do your homework by researching the item in question and gathering all the information you can. When you have completed that task, you will proceed to compare all of the information accumulated. Visit electronic retailers online to compare prices and expectations until you narrow down your choice—and only after all of that legwork do you make your move and purchase the item!
If you want to gain something from a credit card rewards program, you must do the same thing. Don't just apply for the first credit card offering a rewards program that you see. You have to explore your options. Gather information on as many credit card carriers and their various rewards programs as you can, and review their individual incentive programs. Request a rewards catalog and read it carefully. It is essential that you understand the program completely to determine whether using the card will actually earn you rewards.
With so many rewards programs available, it is often confusing to choose a credit card—and you don't want to be misled by advertising for the card or rewards program. Anytime you educate yourself, you give yourself an edge in the credit card game.
Although all cards come at you from different angles, some of the options are basically the same. With most credit cards you can exchange your rewards points once they reach a certain level for a cash reward, gift card, merchandise or airfare. This is where the consumers find themselves in various positions of uncertainty. In some cases, exchanging points for cash might work best for you. This option varies from card to card, but in most cases it works well. You can exchange it for merchandise, but normally the merchandise is overpriced and you use more points than what it is worth if you bought the item from a store. In many instances, you could take cash back, buy that item from your local retailer, and save both money and rewards points.
Many consumers like to use the gift card option. It seems that this is where you can find some good deals from time to time. Other people like to get airfare or other travel incentives. However, there can be problems with cashing in those airline miles in some situations. Airlines hate to turn away paying customers to make room for someone with free airline miles and sometimes you will end up paying more money in fees than you saved with airline mile points.
Again, it is vital that you explore your rewards programs with the same vigor and focus that you would put into examining a loan’s interest rate or making an expensive purchase. Researching and comparing is the only way to decide whether a credit card rewards program is a good deal.
Debbie Dragon is a freelance writer who provides articles for CreditorWeb.com. She writes on the topic of credit cards, rewards programs and general personal finance issues.
