By Matt
Navigating the sea of credit card reward programs can be a daunting prospect. The number of card issuers and their related reward programs seems endless. We’ve all seen the kiosks in airports and malls, smartly dressed twenty-somethings with fierce smiles and clipboards in hand, determined to “just ask you a few questions” often in exchange for a “free gift.” They may very well be offering a fantastic deal, but you need the tools to confirm their claims.
To determine the best card, you need to evaluate your own financial situation, spending habits and needs. The two main considerations for reward cards are: Does the reward structure allow me to maximize my reward potential, and am I going to use, or be able to use the rewards that I accumulate.
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The reward structure
Individual credit cards vary in how they award points to their cardholders. Often a sign up bonus will be offered to get the application process started. Remember that the sign up bonus will require a certain dollar amount of purchases be made on the new card within a timeframe dictated by the card issuer before the bonus points are placed in your account. Once you’ve received your new card you can start accumulating rewards. Make sure you understand how the rewards are earned. Often you will accumulate reward points faster by shopping at specific sponsored partners. The best plan for quickly increasing your reward balance is to make sure that the sponsored retailers are places where you already shop.
Points, points, points
Generally, points are awarded at a flat rate based on purchases made. The ratio is dependent on the card and what a point’s value is. You may earn one point for every twenty dollars spent or a thousand points. The number of points really doesn’t mean anything. You need to consider the value of the points earned. A good way to compare is to go to two reward programs websites and see how many points a $25 gift card costs. Then compare how much money must be spent to accumulate the required number of points. You may be a points millionaire, but if an individual point only has a value of $00.0001 you have accumulated exactly $100 worth of points.
Reward alternatives
Sometimes points are referred to as miles, which can be equally as confusing because they seldom have anything to do with the number of miles you will travel when you redeem for a flight from New York to Los Angeles (especially when your reward flight will probably have you stopping in Chicago, Denver and Phoenix). Miles usually work the same way as points and can be redeemed for travel, products or services.
Finally, in lieu of points-based programs there are cash back credit cards. Under a cash back system anywhere from one to five percent of purchases will be credited back to the account holder as cash. The accumulate cash can be redeemed via check, direct credit to your account, or redeemable for products and services on the reward website. If you do not travel and do not want to be constrained by products offered through a reward program then cash back makes sense.
The best card for rewards is most accurately evaluated on a case by case basis. Understanding how quickly you can accumulate points based on your spending and whether the rewards match your personal tastes are the best guides in determining a perfect fit for you.
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