Rewards credit cards are credit cards that offer a credit card user a certain amount of points for every dollar spent. There are different kinds of rewards programs for credit cards, and it is a good idea to know what each of these rewards programs do.
There are a number of types of rewards credit cards. Essentially the three types are branded credit cards, traditional reward cards and cash back cards. The three types all follow the same model in that they reward the credit card user with spending using the card. There are other types of credit cards that offer “instant rewards” either for signing up using the card or in the shape of discounts or upgrades if a card user uses the card on a certain brand.
Branded cards are credit cards that are branded with some type of consumer brand, often a store or an airline. These cards, as they are offered in conjunction with a consumer brand, can often both afford to offer more generous rewards and also to use these rewards as a way of driving customer behaviour. The good thing about these reward credit cards is that they tend to be the most generous. The bad thing about these credit cards is that they tend to have the least amount of flexibility. It is often a good rule of thumb that the more generous a credit card rewards program is, the less flexible it will be. These types of rewards programs tend to be very good if a person is going to be using the brand.
Traditional rewards cards are rewards cards that have a reward that is granted in the shape of points which can then be redeemed for a number of goods from a number of different partners. These are more flexible as they are run by the credit card company rather than by a consumer brand. They also tend to be less generous, although the interest rate tends to be lower. It is a good idea before signing up for one of these cards to be aware of what rewards are being offered.
Cash back cards are the most flexible of the cards, but the least generous. Instead of rewarding points, they reward cash. This means that the cash can be spent anywhere. Usually the rate of cash is about 1% or less of the amount spent.
