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Research: Credit Card Rewards Scheme: The What, Why and How -

With the rising competition in every field it is not surprising that the economic sector is feeling the pressure too. Banks and financial agencies are doing everything they can to retain their existing customers and at the same time attract new ones. credit card companies are not far behind.

When the credit card was first introduced, it revolutionized the act of buying and spending. Ready cash was always available to help you buy articles that you may not be able to afford then or at any time in the future. While the option of paying later sounds appealing, it comes along with a huge pay back interest rate that has managed to send many people to the brink of bankruptcy. Today, the populace has gotten smarter and many are phasing out their credit cards. The Credit card companies, in a bid to hold on, have started offering attractive packages called "rewards". A credit reward can either be money or points that you can collect every time you use your credit card at a store. The points add up and you will be sent a gift or given a discount on some other item you purchase. The basic concept being that every time you spend, you make up some part of that expense.

Since most people, especially those in the big cities use their credit cards for most purchases ranging from jewelry to groceries; most stores now accept the credit card as a mode of payment. When a store accepts payment through a credit card, it will then pay a percentage of the total transaction amount as a commission to the bank Most credit card companies share this commission with the cardholder in the for of points, money or free air miles. The hidden truth however is that credit card companies by offering you something small actually get you to spend a whole lot more.

The cash back credit card

The cash back credit card is a car which gives you a small amount of money each time you use the card. There are various types of transactions that are included under this scheme. Eating at a restaurant or shopping at a store also makes you eligible to avail of the cash back scheme. All balance transfers and bill payments are also eligible under the scheme of cash back offer.

When a credit card company operates a scheme like cash back offer it normally gives their clients a percentage between 0.5% and 2% of their net expenditure in the form of annual rebate. This annual rebate is transferred to the client's account or paid to him/her separately like by a cheque.

Credit card companies now offer many schemes under the parent cash back offer scheme. You can get gas rebates, money, free air miles, auto rebates, business rewards. All major credit card companies such as American Express, Visa Card, Master Card, visa cards and Wired Plastic offer credit rewards.

However to maximize the benefits of the scheme, you must assess your credit card regularly to review your spending. Compare options and compare credit cards conditions. If you notice that you have a need to limit your spending you can switch to another debit card or reward card.