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The Tricks of a Credit Card Rewards Program
The wide selection and variety of Credit Card rewards programs available for consumers can often lead to some confusion and complications when choosing the right credit card. Credit card companies are clearly in the business to make a profit and do not often lookout for the consumer. They are concerned with their interest rates (which tend to be higher with rewards programs) and fees than with the rewards they are giving the consumer.
With all the confusing credit card lingo and variety of options such as spending tiers, rotating reward categories, and redemption options, there is a chance a credit card can never really work out. You want to have the credit card be a tool to help you with your budget instead of costing you more money.
Here are some tricks that are frequently found with credit card rewards program.
- Opting-in to earn rewards. These rewards program require you to opt-in when they offer a rewards program such as 5% back on all purchases. This is a good percentage of money to reward users with. This puts the credit card company at an advantage because often many consumers do not opt-in at the deadline, saving the credit card company money, yet they can still advertise their 5% cash back rewards program.
- Offering a variety of rewards. Having too many rewards to choose from can benefit the credit card company. Not all items in a point price range cost the same, so the credit card companies take advantage of customers selecting lower price merchandise. Often lower priced items cost a higher amount of points because people tend to redeem points more frequently rather than save them for a big ticket item (for example, a $50 gift card may cost 7,000 points and a $25 gift card costs 5,000 points).
- Reward Caps. Read the fine print. There are often limits on how many points you can earn or redeem in a specific time frame. If a company is offering 5% cash back on all purchases, it may have a dollar limit.
- Fees. Credit card companies charge a multitude of fees from an annual fee to reward fees. Often consumers get their credit card bills and find fees for items they weren't even aware of.
There are some other tricks to watch out for. Be aware of a change in interest rates. Late payments or high balances may trigger an increase in your interest rate. Companies can also switch the interest rate when applying. You might apply for a card with a low interest rate and end up with a high interest rate card. Before accepting an offer take a close look at the terms and educate yourself so that you are not tricked by a company.
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