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Cash Back vs. Rewards Credit Cards
Ah, the sweet rewards of using credit!
Not only do you get immediate gratification with the buy
now-pay later plastic, but now, many credit cards offer rewards
and incentives for using their card to make purchases. You can
get cash back, or gift cards, or 'reward points' that you can
spend on merchandise or services from various merchants. There
are also cards that allow you to designate your 'cash back'
points to a charity - sometimes called affinity cards - and those
that put your cash back into a special savings account for
college.
Great deal, right? You spend your money and get something in
return. The catch is, of course, that you're paying interest and
card fees to get your cash back rewards. But if you're going to
be using the credit card anyway, you might as well get something
back out of it, right?
Most cash-back cards give you 1-2% cash back on most of your
purchases. You'll get a check at specified periods for the amount
of your 'rewards cash'. You can cash the check and spend the
money on anything you want.
Reward cards give you 1-5 reward points for every dollar that
you spend at different merchants and types of merchants. Most pay
you 5 reward points for purchases made at their 'Merchant Thank
You' network, and for purchases made at gas stations, drug stores
and supermarkets. You'll get 1 reward point for every dollar that
you spend at other merchants. You can then redeem your reward
points for particular items from the merchants that belong to the
credit card's merchant network.
Which is the better choice?
Each kind of credit card reward has its own pros and cons, and
the better choice depends on what's most important to you.
Cash-back Rewards - Pros
Cash can be used anywhere, for any kind of purchase. Gives 1%
- 2% cash back on all purchases.
Cash-back Rewards - Cons
Rewards points cards may give rewards of higher value,
particularly for purchases at merchant networks stores, gas
stations and supermarkets. Cash-back can only be used when a
check is issued.
Rewards Points - Pros
Rewards points are often higher value than cash-back. If you
use the credit card for purchases made within the merchant member
network, you can get as much as 5% value back when you spend your
reward points.
Reward points are available to use on a rolling basis. Some
card companies may require you to accumulate a certain number of
rewards points before redeeming them, but reward point rewards
are often more easily available than cash-back rewards. Reward
points can be used for cash rewards in some circumstances.
Reward Points - Cons
Reward points can only be redeemed from particular merchants
and/or on particular merchandise.
Whichever your choice, it makes good sense to get something
back when you choose to use credit. If you're a frequent credit
card user, the rewards can certainly add up. Among the merchants
that belong to various Merchant Member networks are such
well-known companies as airlines, Saks Fifth Avenue, Evelyn &
Crabtree and Smarter Edge.
Joseph Kenny is the webmaster of the credit card comparison
sites Credit Cards Info and also
Credit
Cards 121
MORE RESOURCES:
Credit - Google News
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