Credit Card Rewards Help You Save Money

The "rewards" a cardholder is eligible to receive from the credit card"s issuer, are presented according to the number of purchases the cardholder makes with the card. The credit card rewards offered come in an almost endless variety with some of th

The "rewards" a cardholder is eligible to receive from the credit card"s issuer, are presented according to the number of purchases the cardholder makes with the card. The credit card rewards offered come in an almost endless variety with some of the most popular ones being air miles and discounts off the costs of flights. Some retailers and stores offer "loyalty" rewards when a card which was issued in their name is used for purchases, and you can even earn discounts with some credit cards to put toward the purchase of a new car.

You should be asking yourself if these rewards are worth spending money in order to obtain them, in spite of how desirable they may seem to be. You can best answer this question by making comparisons between the interest rates on purchases made with credit cards that offer rewards and those cards that do not offer rewards. Even if there are many credit cards which offer rewards or loyalty bonuses, the lowest rate of interest on these cards is most often around 15% APR. This will be about 7-8% more in interest than you would pay for a very basic, low-interest credit card and infinitely greater, of course, than you would be paying on the zero-percent rate of interest on the introductory offer with some credit cards. When you examine the whole assortment of credit cards offering rewards, you will find that the interest rates on some will be well over 30% APR.

If your credit card is one of those that has these higher rates of interest and you are using it to earn enough points to get the types of rewards you want, it may be a better idea to switch to a lower interest credit card and save money instead of reward points. If you are the kind of credit card user who always tries to pay off the whole balance on the card before the payment is actually due, and you never pay any interest, the rewards for using your card are genuinely free. You may want to consider the alternate choice of the cash-back credit card if you are not sure you can keep up with the discipline of paying off the whole balance of your credit card each month. Similar in principle concept to the reward credit card, a cash-back card pays back cash equivalent to a preset percentage of whatever has been spent on the card each month.

You will be paying an excessive amount for the use of a cash back credit card, if the amount you spend attracts the 19% APR in interest and the current best cash back rate is somewhere around 5 percent on the spent amount. If you are in the habit of repaying outstanding balances each month to avoid having to pay interest, you will be able to pocket this very welcome 5% cash back.

Credit cards with rewards and their family members, cash-back credit cards can therefore, be worth it, when you are maintaining a personal policy of repaying the balance on your card, before it starts to attract interest. When used in this way, these credit cards can be very beneficial to your personal finances.

Article Source: http://www.eArticlesOnline.com

About the Author:
Alisdair Cosgrove is a freelance writer specializing in personal finance. You can read more of his work at www.JSNet.org for credit cards and also offers a comprehensive list of airline credit cards.