Credit Card Deals that Pay: Rewards Programs

Conventional Wisdom says that credit cards cost you. You have to pay annual fees, balance transfer fees, late fees, over limit fees, under use fees, interest and a host of other costs. For most credit card users, that’s absolutely true. Some people, however, beat the credit card companies at their own game. They use credit cards that have rewards programs so that the credit card companies pay them, instead of the other way around.

To get the most out of credit card reward programs, you have to be the kind of person who rarely carries a balance from month to month on your credit cards. When you carry a balance like that, you pay interest on the unpaid amount. Credit cards that have rewards programs attached to them tend to have higher interest rates, so the interest can easily offset any rewards you get.

If you pay your credit card balance off every month, you can get make out like a bandit using a credit card reward program.

Types of Rewards Programs

There are three main types of credit card reward programs: point programs, cash-back programs, and credit-toward-purchase programs.

With a point type of reward program, you are given points for every dollar you spend. You accumulate the points and redeem them for merchandise or gift certificates from a catalog or sales portal. You can buy television sets, home electronics equipment, exercise equipment, gift certificates at fancy restaurants, clothes—the list is endless. You can use your rewards for personal purchases or for gift shopping — whatever helps your budget the most.

A cash back card gives you a rebate for using the card. You may either be given a credit on your card for every purchase or you may get a rebate check every quarter or so. Either way, you are making money by shopping with your credit card.

The other type of credit card reward program lets you earn discounts and credits with partner companies, such as gas companies, clothing stores — even Starbucks. You use them to make purchases with those companies. If you use this type of rewards program, make sure you can use the discounts or credits.

An example of this kind of rewards program is when you earn Frequent Flyer miles for each purchase. This is a great way to accumulate miles if you like to travel, but remember that Frequent Flyer miles always have lots of limitations—black-out dates, limits on how you can use them, etc. Again, make sure you can actually use the miles that you accumulate.

Choosing a Rewards Program

Sort through your credit card deals and compare the ones that offer rewards programs. Decide what kind of rewards you want to accumulate—merchandise? Frequent flyer miles? Gasoline credits? Cash? Then choose the card that offers the most rewards that you want, and has the best credit card deal as far as interest and fees goes.

Using Rewards Programs to Your Advantage

Here are some hints for making the most of credit card reward programs:

• Only use one credit card that has a great rewards program. Don’t spread your purchases out over several cards. You’ll accumulate rewards faster by using just one card.
• Use your card to pay for everything — groceries, utility bills, gasoline. Put every purchase and pay every bill you can with your credit card. That way you’ll spend lots of money with it and accumulate lots of rewards.
• Pay the balance off every month. You don’t want to be paying interest. Remember, you want them to pay you, not the other way around.

If you are disciplined and pay off your credit card balance every month, you can use credit card reward programs, cash-back incentives and rebates to make money, instead of paying interest on your credit card balances.