In a world where there are so many options for consumers when it comes to the choice of credit cards out there, many companies are now using different tactics in order to attract consumers that may go elsewhere if their cards are not bough to their attention. Many offer 0% interest offers on purchases or balance transfers but those card offers only apply to certain individuals who are looking for that sort of thing.
What about the consumer that wants a credit card to use week in week out every month before paying off their balance in full, or those consumers that would rather spend on credit cards and leave their money in their accounts until the credit card bill comes through to earn interest? 0% offers do not appeal to them because they do not need the 0% offer to avoid earning interest.
This is where the idea for reward credit cards was conceived. Some bright spark came up with the idea of reward cards because they actively encourage people to spend on them. If you get rewarded for using the card then people will spend on them every month in order to earn the rewards at the end of the given period of time or when they have enough points. However, not all of them actually provide people with good value for money and even more have reward schemes that are extremely hard to get anything out of at all. However, to understand a little more about them, we first have to understand what form they come in:
* Cashback - Some cards offer cashback as a percentage of the total amount spent on the card. These incentives are usually amongst the poorest because the percentage of cashback is usually really low at around 0.5%.
* Loyalty points - Loyalty points are credited to an account that is related to the card, usually for every pound spent on the card, although they may only be awarded when you spend in certain stores. They can often be converted to rewards in terms of goods or an amount to spend in a certain store.
* Airmiles - This is one of the most popular schemes out there and has been for some time. Spending on the card converts into airmiles, which can then be redeemed with certain airlines at a later date.
After looking at the types of card available, it is up to you to look into the reward schemes to see what advantages and disadvantages they have in terms of whether or not they are value for money. Some of the reasons why they do not provide value for money are as follows:
* It takes a lot of spending to earn even the slightest reward. This may be because the cashback percentage is low or you have to fulfil certain criteria to earn anything back at all.
* The schemes are limiting because you can only earn points in the one store or have to be earned in certain places or for certain goods.
* The schemes offer incentives that you will never need or use and thus are completely redundant.
As you can see, a reward scheme on its own is not enough. You need to be able to compare the entire scheme in terms of the terms and conditions and structure of the reward scheme itself to your wants and needs. Be sure to look at it in depth before applying to make sure that it is good value for you!
