Various types of credit card reward programs and their significance

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Credit Card Applications » Research » Guides » Travel with Credit Cards » Various types of credit card reward programs and their significance

Various types of credit card reward programs and their significance


Updated: December 26, 2012

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There are a dime a dozen credit card schemes in the market these days. Trying to choose the best one can be like looking for a needle in a haystack. Again, there is no such thing as the best reward scheme. We shall come back to that thought again during the conclusion of this article. The most common or popular credit card reward scheme is the points based reward scheme. Under this scheme you will earn points every time you spend a dollar or every time you swipe your card at a merchant on credit. These points can be redeemed for gifts from a catalogue or cash that will be credited to your attached account. It is important not to get carried away and start spending too much with the hope of earning more points. The points that you make are not necessarily something that you earn, as they force you to go to a certain merchant, because only certain merchants who are affiliated to the bank will offer these points. Another type of reward scheme is for gasoline purchases. Each time you fill up your automobile with gas, you will receive points that can be redeemed for gallons of gasoline. But again, you will get these points only when you swipe your card at affiliated gas stations. You can only redeem these points at affiliated gas stations. Lastly, you have the air miles reward program. Under this scheme, you get air miles for every dollar that you spend on your credit card. These air miles can be converted to real air miles when you buy a ticket online using your credit card with affiliated airlines. However, not all destinations will be covered, nor will you get to travel by any airline at any class you want. All these reward schemes do not usually come free. You will almost certainly have to pay an annual fee in order to maintain these schemes. Hence, you have to make the choice of whether or not you actually need them when you open your bank account. I made the wrong decision of taking a $25 annual fee rewards scheme that would give me points from which I could make cash. I was required to spend $300 every month in order to make $25 a year. I later found out that my employer would pay only in cash and that I had to use the credit option whenever I swiped at a merchant. Most merchants are not patient enough to listen to what you are saying after you give them the card. Reward schemes benefit the bank and the affiliated merchants, which is why they are in place. You can make use of them if you are willing to add more thought in your day-to-day purchases. If not, you will just be paying an annual fee that will not be beneficial to you in any way.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products’ Terms & Conditions on the issuing banks' websites.
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