Every time you venture to your mailbox, you’re likely to find that your credit card company is offering a new rewards card. While such cards may be considered lucrative for the perks they offer to card holders, they can indeed prove troublesome when used improperly or excessively. This article will explore both the pros and cons of rewards cards, and will guide consumers into effective usage methods to ensure that they garner the most benefit from their rewards card.

The initial question which most consumers share is “What is a rewards card?” A rewards card is simply a credit card that offers consumers rewards for usage. These rewards can range from free airfare mileage to free hotel stays. Although the word “free” tends to resonate quite well with consumers, it doesn’t always justify enrolling for another rewards card or upping the usage of an existing one. You may be paying additional money for you free trip and whatnot by using your rewards card than if you were to pay for the trip upfront.

In the context of rewards cards, not all cards are created equal. Some will simply lure you in and ding you without your knowledge. On that note, here are some of the things you should avoid when selecting a rewards card.

High Interest Rate – The majority of rewards credit cards come bundled with inflated interest rates, even more so than traditional credit cards. As you might imagine, the inflated rate is used to offset the cost of the reward which you think you’ll be getting for “free.” If you’re not careful, you may fall into this reward card trap. Thus, whenever considering an offer, be sure to be critical of the rate offered by the card. If it’s excessive, don’t allow yourself to be blinded by the 3-night stay in Cancun. Exercise some restraint and you should manage.

Fixed vs. Variable – Check and double check the sort of interest rate your credit card company offers, whether it be fixed or variable. With fixed rates, your credit card company doesn’t have the opportunity to raise the rate when they wish. However with a variable rate, you have not such luck. Stick with fixed rate rewards cards. Credit companies can pull a bait-and-switch tactic by offering you a variable rate card at a low percentage, and can then switch the interest rate after you’ve enrolled.

Annual Fees – Again, credit card companies can afford to pay for your perks by upping a specific card’s annual fees. Be on the lookout for such inflated fees and avoid cards that are charge noticeably more in annual fees than their counterparts.

While finding the right rewards card can be hassle, there are many rewards to be reaped from having the right one. Below you will find some of the perks that are available to rewards credit card holders.

Redeemable Points – Many rewards cards work a point system. With every transaction you make using the card, you accumulate some points. These points can be used to redeem various things, such as gift certificates, hotel stays, etc. Some card companies may make it difficult to accumulate the needed points for a specific thing you may have your sights on. If you know you’re not an avid credit card user, check whether the rewards card has a limit on the number of point-rewarding transactions you can make or whether there is restrictions that bind you to a specific time period for garnering points.

Cash Back Rewards – Currently, many rewards cards also offer cash back on purchases. A certain percentage of your collective expenditures is returned to you. The specific amount varies, but most rewards cards offer 1% cash back.

Frequent Flyer Miles – Probably one of the most common reward mechanisms for rewards cards is frequent flyer miles. For every expenditure you make, you are rewarded on a per point or mile basis (varies from card to card). When you accumulate the appropriate number of miles or points, you can redeem a free airfare for you or your family.

Frequent Flyer Credit Card Tips
Rewards cards that offer frequent flyer miles can be especially useful for those who are constantly traveling. They can get two things accomplished with a rewards card. They can build their credit while accumulating points towards air travel.

There are some downsides to having a frequently flyer rewards card, however. For one, to accumulate an adequate amount of points or miles, you need to use the rewards card rather extensively. This can prove rather difficult for the average consumer, and can thus be considered a trap which credit card companies place to trap unknowing consumers in. However, if you’re a frequent credit card user and traveler, this card may be for you.

Prospective card holders also need to be careful when reading the terms of the rewards card in respect to frequent flyer rewards. Some companies will limit the number of points or mile an individual can accumulate, or will set a specific time frame where point accumulation can occur. Thus, be diligent in reading all the fine print.

While these, as do other rewards card, have their drawbacks, they can be substantially rewarding to those who travel for a living. As said above, these sorts of cards can accomplish two or more things at a time when used effectively.

The Perfect Card for Me
You yourself are responsible for defining the perfect card for you. In general terms, however, you should look for a card that offers a low interest rate, low annual fees, and a fixed rate. However, the specific rewards mechanism is your choice. You should conduct adequate research before selecting your specific rewards mechanism, as far as time and other restrictions go.

A rewards credit card can without a doubt prove beneficial to most, if not all consumers. While there is some homework involved in uncovering the perfect card, it can well be worth it.

Rewards Credit Cards
	CUA Gold Rewards Mastercard 18.74%  more» Redeem reward points for shopping vouchers, merchandise, hotel stays, petrol vouchers and much more.
	IMB Gold Rewards Mastercard 18.74%  more» Reward points for shopping vouchers, merchandise, hotel stays, petrol vouchers and much more.
	Woolworths Everyday Money Credit Card 18.74%  more» Enjoy a great rewards program that gives you real value rewards, simply by using the credit card on your everyday shopping.
	ANZ Rewards Visa 18.99%  more» Choose from a wide range of everyday Rewards
	ANZ Gold Visa 18.49%  more» Extended Warranty Insurance for up to 12 months, in addition to the Australian manufacturer’s warranty*

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This entry was posted on Tuesday, February 2nd, 2010 at 5:55 pm and is filed under Frequent Flyer, Rewards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.