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Reward programs are becoming more of a factor in using other reward credit cards. Reward cards offered by major credit card companies allow you to earn redeemable rebates or points for the purchases you make. Potential rewards include airline tickets, merchandise or fuel reimbursement, car rebates, cash back, investments or contributions to a college savings plan.
There are so many other reward credit cards that offer rewards these days that there's no reason to have a "plain" credit card that only gives you a line of credit. Frequent flyer cards seem to be popular, as are "rewards points" programs offered by companies like Sony. But often, these cards have a level of complexity to them that one might not expect. For instance, points and miles expire or have limitations.
So, with credit cards offering all manner of rewards to their customers, consumers should be aware of how to make the rewards work. By only using one credit card, consumers can build up rewards more quickly than they would, by using multiple other reward credit cards. Also, consumers should be careful of other reward credit cards, offering rewards, since their interest rates are usually higher than those of regular credit cards.
Other reward credit cards typically have an APR about 4 percentage points higher than other credit cards, which is around 14 to 16 percent. With such high interest charges, a rewards card makes sense if you plan to pay off the balance each month. Therefore, the best type of other reward credit cards is the simplest: cash back.
Financial experts say about how other reward credit cards can have a downside. They talk about how people use several different other reward credit cards to optimize their rebates. For instance, the Chase Freedom card for gas because it's offering the biggest rebate on gasoline purchases, MBNA World Points card at the local supermarket because of its 5% rebate on purchases of groceries between now and the end of the year, etc.
Typically, the rewards offered by other reward credit cards will generate greater college savings than the savings club programs. Your aim should then be to keep spending at current levels (i.e. within your income) but to replace checks, cash, and other credit/debit cards with the rewards card as your principal method of payment. Also, use the credit card as an intermediary payment vehicle for large purchases. For example, if you borrow to make home improvements, pay contractors and suppliers first with the other reward credit cards and then pay the credit card with your home equity loan. This will earn you additional points.
However, it is very important that you pay your statement balance in full each month. Rewards earned at 1% or 2% will quickly dissipate if you are paying 10% to 13% interest on even a small balance. For rewards to accumulate effectively, it is essential that you use your other reward credit cards as simply a substitute for cash payment and not as a source of additional credit.
Follow these strategies. And a savvy, disciplined family can reap sizable rewards from other reward credit cards program with relatively little effort!!!
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