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Research: Credit Card Rewards - Disadvantages and Advantages -

There is an intense competition in the markets for customers and credit card companies are trying everything that they possibly can to gain more customers. However, the rush is not for those who do not have a credit history or have a massive outstanding balance to their name. The competition is for those customers who have a very good credit history. For this reason, credit card companies are offering numerous offers in order to entice the creditworthy customer to use their cards.

The major benefit of the rewards that come with a credit card is of course the underlying savings that a customer can make. If there is a cash back offer, of say 5% on a purchase, it means the customer automatically saves 5% as discount. Add to it the fact that customers get discounts up to 20% on select purchases with merchants who have tie-ups with the credit card companies.

On a purchase of a thousand dollars, a customer can save more than fifty to hundred dollars which is quite good. More and more credit card companies are also offering airline miles to customers who can then redeem them for a trip once in a year. There are other credit card companies, who have gone one step ahead. They offer customers double cash back and twice the number of air miles for all purchases on weekends. Given that most working people do their shopping on weekends it suits quite well for them and they make quite a lot of saving. Some of the lesser known benefits of premier credit cards include 0% APR for the initial period, less regular interest rate, no annual fee and processing fee waived off as well.

Although, a premier credit card looks a prospective deal with all the rewards, one should keep at the back of the mind that credit card companies are out there to make a profit. There are indeed some disadvantages of the premier credit cards. Although credit cards are required for a good credit history, one can get carried away with their shopping due to the discounts. This leads them to not be able to make payments on time leading to heavy penalty in the form of high interest. Secondly, the discounts drive customers to merchants they normally wouldn't visit. This means they prefer brands which they don't usually go for due to the discounts and spend there too. This is because some of the discounts apply only if you buy a certain amount of goods.

There is a cash back offer which leads one to buy more and buy often. However, most people fail to check the fact that cash backs always have a maximum limit per month as well as per year which turns out to be less than what one would have calculated at the back of his mind. Another important problem with the credit cards is the fact that no annual fee only means it has been waived off for the first year, most of the times, due to which the customer starts incurring an annual fee of fifty odd dollars from the second year onwards.