The Most Bang for Your Buck
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The Most Bang for Your Buck


Updated: December 26, 2012

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The Most Bang for Your Buck
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Not all cards are created equal: How to determine which rewards card is best suited for you

Many credit cards offer rewards, points and mileage programs, but not all cards are created equal. That's why it's important to closely evaluate credit card features to determine which card will meet your needs.

The type of rewards card you choose will depend on your spending habits, lifestyle and needs, says Daniel Drummond, a spokesperson for Your Credit Card Companies, a Washington, D.C.-based consumer education group. There are many programs available and consumers should closely compare them to find the best match for them. "The credit card is just another product, and people should shop around to find the best card for their needs," he says.

As with any other product, credit cards use different marketing tactics to attract new customers. Some rewards and rebate programs are more liberal, while others are more limited. Recognizing this difference is an important step in choosing an incentive-based credit card that will give you the most bang for the buck.

Trying to Catch Your Eye

Have you ever noticed that some credit card companies make their programs really enticing and easy to take advantage of? The underlying agenda for many liberal cards is to introduce a new product with a generous rewards program to quickly attract customers. These rewards cards may charge an annual fee or carry a higher annual percentage rate than other existing credit cards.

For example, The Chase Ultimate Cash Award MasterCard gives up to 5 percent cash back for purchases made at supermarkets, gas stations, drug and home improvement stores, and up to 2 percent everywhere else MasterCard is accepted. There's no annual fee and a zero percent introductory fee on balance transfers for the first nine months. However, it charges a regular, ongoing APR that starts at 13.99 percent.

On the other hand, some programs tend to be more restrictive. These cards don't rely so much on incentives to woo customers. They tend to be more established cards with primary offers that are attractive enough without all the extra frills, so they can afford to offer less cash back and fewer points.

Making a Side-by-Side Comparison

To select the best type of rewards or rebate card, you should make a side-by-side comparison of the different options that are available. You can do this by simply creating a comparative chart in a common spreadsheet program like Microsoft Excel. Or for an easier solution, consider using one of the many tools that are available online, such as those found at Credit-Land.

Most comparative tools will let you research cards by different categories, such as cash back, airline miles, travel points, overall value or even car purchase credits. Generally, you can receive details about each of the different cards listed. More importantly, you can make an instant comparison among cards in the same category.

Remember that some cards are more liberal than others, so be sure to make an apples-to-apples comparison of all significant features to accurately determine how they stack up. List the specific rewards, restrictions and provisions of each card. Also notate other important terms like introductory and annual percentage rates, annual fees and credit limits.

You'll find that some cards allow twice as many points for certain spending, while others might offer "no blackout or restricted period" for using their points. If you leave or close your account, some cards allow you to buy or take the points with you, while others will automatically cancel them. And with some programs, points will expire after a certain time.

It doesn't matter how you compare the different types of rewards and rebate cards using a spreadsheet or online calculator. The important thing is that you create a clear picture of the differences between the programs that different cards offer. Then you can clearly see which programs are truly more or less beneficial to your specific needs.

Let the Buyer Beware

Finally, as you compare the different program features, beware of restrictive factors that can dampen your card benefits. For example, one particular cash-back card from Discover doesn't always apply the highest rebate offered to all purchases made with the credit card. In some cases, 1 percent will only be applied to purchases made after the cardholder spends over $3,000 in one year; so the overall cash rebate earned will be less than 1 percent, depending on the amount spent. For instance, if the cardholder were to spend $4,000, the 1 percent discount would only be applied towards $1,000, the amount over the $3,000 yearly requirement. In this case, the actual cash-back percentage would be 0.25 percent.

You also need to be aware that some rewards credit cards have very specific currency and their points are applied as a credit - not given as a cash rebate. When it comes to airline or air mile programs, many require you to accumulate 25,000 points before you can earn a free ticket, and these points can become worthless if they expire before you can use them. They can also become expensive if you earn them by carrying a balance on a high-rate card.

The bottom line: let the buyer beware.

Types of Rewards and Rebate Credit Cards Types of Rewards and Rebate Credit Cards
There are a variety of credit cards with rewards and rebate programs available. Rewards credit cards generally allow you to earn bonuses for using your credit card on daily purchases. They typically offer frequent-flyer-miles, hotel discounts and entertainment-based incentives.

With rewards cards, you basically accumulate points towards a reward structure, which is based on how much you use the card over a period of time. While these types of cards tend to have higher rates than standard cards, they're perfect if you can pay them off quickly.

Cash-back credit cards give you cash rebates for making purchases with the card. Essentially, they let you earn cold hard cash while you shop. And if you shop at particular locations, you can reap even higher bonuses. Cash-back rebate credit cards allow you to earn a flat percentage of your daily charges or earn based upon the balance of your account.

Most cash rebates are around 1 percent of the total purchases - excluding interest and finance charges. Cash-back cards may be ideal for someone who has good-to-excellent credit and typically pays off balances each month.

Airline mile or frequent flyer credit cards award credits whenever you use your card. You accumulate "points" based on the dollar amount of your credit card purchases over a period of time. You can then redeem your points for airline travel, much like with frequent flyer miles. These cards are great if you travel frequently or simply want to use your card to plan vacations.

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