Admittedly, there's nothing particularly thrilling about purchasing your weekly groceries or filling your gas tank. Well, not under normal circumstances. However, when those frequent purchases can help you pile up points from your credit card's reward program, the whole experience can suddenly feel much more exhilarating. That is precisely why many credit cards incorporate reward programs based on points.
A points-based reward program can be a game changer for you as a credit card user. It makes using your card more appealing and incentivizes you to utilize it for various purchases, thus contributing to your accumulation of reward points. Imagine being rewarded for your everyday shopping - it certainly adds an element of thrill to the process. Credit card companies recognize this excitement and are offering a myriad of points reward programs tailored to meet the preferences of a wide range of users. Before choosing the perfect points card to slip into your wallet, here's what you need to understand about points reward programs.
How Point Rewards Work
The basics of point rewards are simple. You spend money on your credit card. You earn points for the purchase. The more purchases you make each month, the more points you receive. Some credit cards will offer more points for specific purchases, like tire purchases, home improvement purchases, etc. Other companies offer bonus points for shopping with travel companies, like airlines or hotel chains.
Many point rewards credit cards offer bonus points for making a specific dollar amount in purchases during the first three to six months of having your credit card or even for large balance transfers to the card. These bonus points are often very attractive to consumers. They may be suitable to encourage you to take on a new rewards credit card – especially if you anticipate a large purchase in your future that might put you over the edge for the bonus.
Types of Point Rewards
Points rewards offer the greatest versatility for credit card companies, and the variety available gives consumers many options when comparing points. Some cards will even offer multiple options to consumers about how you redeem their points, putting you in the driver's seat of your rewards program. Common types of point rewards include the following:
- Travel points or miles
- Cash back
- Gift cards
- Merchandise
- Charitable donations
- Statement credits
There are many options to consider when it comes to point rewards programs. You might want to take your time and compare your options based on a few criteria, such as those below:
- Types of rewards that are available.
- Ease of redemption.
- Interest rate.
- Fees and fine print.
- Bonus point offers and achievability.
- Does the card offer points for the way you spend?
There's a lot to consider, but choosing the right points reward program can make a difference in how well the process works for you.
Redeeming Points
Most credit card companies make the point redemption process easy to do online. There may be requirements for redeeming points, such as a certain number of points accumulated or a specific value to redeem. Some points may be subject to blackout dates and other restrictions. That is common for travel rewards for airlines, hotels, etc., during busy seasons. Find out about potential restrictions that may interfere with your plan for using your points and miles ahead of time to avoid potential problems.
Maximizing Points
The key, as always, is to have a plan for maximizing your reward points. Since many reward programs offer substantial bonus points to entice new customers, consider waiting until you need to make a large purchase, such as booking vacation accommodations or purchasing a large appliance for your home, to take advantage of the initial bonus.
Additionally, pay your balance each month. That minimizes the interest you pay for your purchases and helps to make the rewards infinitely more rewarding.
Finally, don't bite off more than you chew or can quickly repay to get the initial bonus. If that won't work for your budget, consider a different card with lower spending requirements or a more extended time to reach the goal.
Potential Downsides and Risks
All credit cards carry risks to consumers. The most significant risk is that you cannot enjoy the full benefits of the reward program due to interest charges if you must carry over a balance every month. The other risks usually reside in the small print. You can diminish the value of rewards if there are excessive fees or if you misunderstand the terms and conditions.
Comparing Programs
It doesn't matter how great the rewards are. If the credit card doesn't award points for how you spend, it will be useless to you. Compare the different types of points reward programs available to you and choose the one that offers the most points for your everyday spending, an easy redemption process, and a bonus offer that is achievable for your budget and spending comfort.