The aim of credit card companies is to bring in new business and new customers and one of the ways they do so is to make opening up a new account sound attractive and appealing with rewards. There are lots of forms rewards programs can come and it is usually up to the consumer to decide if they make opening an account a worthwhile decision.
When you are thinking about opening up a new rewards program credit card, there are lots of things you are to put in to consideration. We will be discussing some of those things in this article. We will also discuss what credit card rewards are and how to determine if they are worth it for your financial situation.
What Credit Card Rewards Programs Are
Credit card companies and financial institutions developed credit card rewards programs so that more customers can sign up for accounts with the promise of being able to earn rewards. Different companies and cards offer different rewards. These rewards vary but usually, they are within one of the following categories:
- Cash back rewards. With this type of reward, credit card companies will allow you to build up cash credits dependent on how much you spend on your cards.
- Hotel and car rental points. Credit card holders in these rewards programs can build up points to use towards discounts on car rental and hotel expenses.
- Miles rewards. One of the most popular types of rewards programs is airline miles. With this program, cardholders can earn mile points to go towards airline ticket purchase discounts.
- Gas card rewards. With this type of credit card, holders can build up discount points towards purchases of gas.
Credit card companies like to give out these cards to qualified applicants because it helps encourage more spending; they hope that the majority of spenders won’t pay off their purchases before APR’s accrued.
What to Consider
There are points you should consider if you have received a credit card rewards offer or you are considering signing up for a new account. These points are to determine if it is the right step for you to take or not. Consider these points:
- Do you tend to pay your credit card balances off by the end of the month?
- Credit card rewards programs should be an added perk for responsible credit card holders; unfortunately, if you spend regularly on credit cards, but don’t pay off your balances each month, this credit card is probably not for you. This is because the amount you’ll end up paying in APR fees will probably be higher than the amount of rewards you actually earn.
- Are there any fees associated with the credit card account?
- Monthly or annual fees associated with the card are also something that could negate the reason for earning rewards. When making your decision, compare how much you’ll pay in fees to how much you expect to earn in rewards with your spending habit averages.
- Are the rewards offered ones that you’ll use?
- If you don’t plan to fly anywhere within the next couple of years, a miles rewards card is probably not for you; the same goes for gas cards if you do little driving. Consider the rewards being offered in comparison with your lifestyle before signing up.
When Not to Sign Up for a Reward Card
For every credit card account, you need to carefully consider your financial situation before you sign up for a new account. If you do not have any plans of making any big purchase any time soon, you do not need to open a new card account. If the card has a high APR, it is going to negate the value of the rewards. Also, if the fees are high, it is better to stay away.
How to Maximize the Benefits of a Rewards Credit Card
Make sure you maximize the usage of the card as much as possible if you have signed up for one. Be sure to create a spending budget for your card and pay it off each month to avoid paying too much in APR fees. Making sure you pay your card on time each month consistently should also help open up a higher credit line after some time, which can increase your credit score.