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Reward, Rebate, and Travel Credit Cards
 Jul 29, 2004

Most credit cards have some type of benefit, with reward, rebate, and travel credit cards the benefits are more specific. In this article we will review how reward, rebate, and travel credit cards work and the pro and cons of earning and redeeming these awards.

With all of the credit card issuers out there who want you business, it is no surprise that a number of cards offering perks have developed over the years. Indeed, reward, rebate and travel credit cards are becoming increasingly popular as consumers demand that cards offer extra benefits.

Common rewards from credit cards

Reward, rebate and travel credit cards provide an array of possibilities. And now, many cards offer flexible programs: It is possible to choose what kinds of rewards you want, and choose from a menu of possibilities. You no longer have to choose between a travel miles card and rebate card; instead, you can have one card that offers both.

Here are some of the common rewards that you can expect to see from credit cards:

Travel: Travel credit card rewards refer to points you can earn and then redeem for travel. Airfare miles allow you to work toward free airline tickets. Many reward credit cards allow you to earn free nights in hotels, or to earn fee car rentals. In some cases, you get discounts off the regular prices for these items. Some travel reward credit cards actually allow you to redeem your rewards for entire vacations or cruises.

Merchandise: There are reward credit cards that offer merchandise. You can turn in your points for clothing, electronics and other consumer items. Some credit card reward programs offer you points that you can use on shopping sprees. Toys R Us, for example, has a program through a credit card issuer where you can get points to use for toys at the store. Other reward perks in this category include such items as concert tickets and upgrades on certain items and events.

Rebates: Rebates are among the most popular of credit card rewards. You can receive cash back for purchases you made. These rebates may be on specific merchandise or travel reimbursements, or it can be actually cash back. Some programs will send you a check when you spend a certain amount of money. This is usually expressed as a percentage, such as 2% cash back on all purchases, or 5% cash back on gas purchases.

Another facet of the rebate credit cards is statement credit. Instead of getting cash back, you get a statement credit. Earning enough to get your balance reduced by $100 or $200 (or more) can be very valuable to some people. A lower balance means less paid in interest charges, and can help you get out of debt faster.

Things to be aware of with reward, rebate and travel credit cards

All credit cards, of course, should be used with caution. Reward program credit cards are no different. No matter the program you choose, it is important to be aware of the following:

  • You may only earn points on "qualified" purchases. In some cases, you only earn points at certain businesses, or types of purchases. Other programs offer different point values for different purchases. You may get more points for electronics purchases and less for groceries. (The flip side, though, is that you may get double points on some purchases.)
  • Your points may have an expiration date. Check carefully to see if your points expire. You may only have two or three years to use your points. This means that you may not have time to amass enough points to get the rewards you really want.
  • Points may come with use restrictions. Your points may have restrictions on how and when they can be used. The most visible version of this is the infamous "blackout dates" used with travel credit cards. These are dates (usually during high traffic times that you would want to use them) that your points are ineligible for use. Additionally, some points may be selectively redeemable.
  • Interest charges can destroy the value of your rewards. One of the most insidious things about reward, rebate and travel credit cards is that often the issuer makes plenty of money. This is because most people carry balances on their reward cards. They run up balances in order to get points, but then carry those balances. The interest charges on the balances often more than make up the value of any rewards. Consider cash back. Say you are carrying a $1,500 balance on a card with 13% interest and 5% cash back on all purchases. You get a check for $75. But you carry the balance for a year, and you pay $195 in interest. The company has made $120 off of you.

It is important to carefully consider your rewards program. Make sure that you will use the rewards, and make sure that the rewards are worth it. Pay off your balance monthly to maximize your reward program.

Related Article: Low-Interest Credit Cards >>

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