Credit card companies make money from you - lots of money. So much in fact that they're happy to send some back in the form or rewards or points. We've all the seen the ads for miles, free car rentals, and rewards - the array of options can be confusing.
To make things simple, think of it this way: Credit card companies will assign a dollar value to the rewards they offer you, usually between 1% to 3% of your spending.
Minimum 1% cash value rewards:
One percent is just the beginning, and you should not accept anything less. The 1% may come in the form of credit card rewards or points. You typically get 1 point per dollar spent. When it comes time to redeem those points, guess what: 100 points buys a you a dollar's worth of rewards - you save a dollar for every hundred you spend. This is okay, but you can do better.
Combination cash back and other perks:
Look for multiple offers with cash back, gas credits, miles, and selected retailer rewards.
No cash-back or points?
If you're not getting cash-back, miles, or other reward combinations you should be getting an exceptionally low interest rate. If not, consider switching to a new card.
Special offers of 3% and more:
Keep checking the latest offers and you can sometimes find an exceptional deal. For example at the time of writing, Chase Manhatten is offering a triple rewards card that offers 3% back at selected retailers, and 1% back on everything else. Not a bad at all. The key to using your credit card rewards is your spending activity and payment habits.
You stand to save the most when you use (and pay off) your card frequently. If not, consider going for the lowest rate instead of reward options. Remember the rule - you can get 1% to 3% back on everything you buy with your credit card. Spending a little time now will result in big money savings down the road.
