Reward Programs
Credit Card Reward Programs

Credit card reward programs that offer cash rebates,
gift cards, or free or discounted merchandise are
becoming increasingly popular. Competition among
credit card companies is fierce and each is continuously
looking to get an edge on their competitors.

Besides offering better interest rates and eliminating
annual fees, credit card companies make their cards more
enticing by offering a reward program. The details and
rewards for each plan will vary from one card to the next,
but they all work in a similar fashion.

For every dollar you charge to your rewards card you
receive one or more points. Once you have gathered a
certain number of points you can redeem them for merchandise
or cash. The merchandise available will vary from one
card to the next but they usually include a range of
electronics, personal appliances, and sporting goods.
Most programs also offer gift certificates so you can pick
out exactly what you'd like.

Comparing Credit Card Rewards Programs

Before applying for a card with a rewards program, you
should think about which type of program would best fit
your needs, or even if a rewards card is your best option.

Cards that have rewards programs generally charge annual
fees, while many standard cards do not. Also, the interest
rate on most rewards cards is at least a few percentage
points higher than other cards.

If you are the type of
person who pays his bill in full each month and rarely
carries a balance, a rewards card would serve you well.
You can earn many points while keeping finance charges
and fees to a minimum.

On the other hand if you usually carry a balance, you may
be better off choosing a standard card with a lower interest
rate and no annual fee. The finance charges on your balance
will lessen the value of your reward, and you may even find
that you could have bought your reward yourself for less
than you paid in fees.

Another factor to consider is the points themselves. Do they
expire? If so you'll need to charge enough each month to
ensure you get your reward before you lose them.

How many points do you get for each dollar spent? The most
common answer is one point, but some cards offer more than
one point when you shop at preferred merchants.

For example, you may earn one point for each dollar spent at most stores,
but five points when you fill your tank at a participating
gas station. If you regularly use merchants that belong to
the program you can accumulate points much faster.

Cash back!

Some cards will actually give you cash back. In this case
you should look for the card that combines the lowest interest
rate on purchases but the highest cash back rate. Most cards
offer about one or two percent, though you can sometimes find
one offering as much as 5% back.

So for each $1,000 you spend you will receive $10-$50 back.
It's not huge, but it helps.

Again, the key to using credit cards with reward programs is
calculating how much you actually save by using them and if
you would be better off using a standard card without rewards.

Ed Lathrop is a successful real estate investor and a series 3 commodities futures broker.
He has extensive knowledge of the credit/mortgage markets.  He has built the financial
calculator Website, ezcalculator which is free to use and includes the calculator, "Pay Your
Credit Card Debt Quick."  Ezcalculator can be found at Mortgage Calculator or by going to