Banks have issued so many credit cards that they made themselves engaged in fierce competition with each other, fighting for customers’ attention. Therefore, they constantly come up with different credit card incentive programs designed to encourage customers to use their credit or debit cards more frequently. These programs offer to card-holders either points, or flyer miles, or cash. We are explaining the differences between these types of rewards in the paragraphs below. To those readers who are not interested in receiving any rewards on their credit cards, we are also explaining about plain vanilla credit card and what benefits it gives to card-holders.
Cashback Reward Cards
The monetary award that some cards offer is referred to as cashback. The credit cards that promise to return cash to their users are called cashback cards. As a rule, cashback cards pay the users a small percentage – around 5 percent – in cash rewards for each transaction or a purchase that is larger than a certain amount. Card holders usually receive this cash return while they are making their purchases. If you are interested in learning more about this type of credit cards, you may see details in the article enumerating the best cashback cards of July 2019. It will help you choose the right card best suited to your financial situation and goals.
Points Reward Cards
Other credit card companies give you rewards in the form of points. Every time you use your card, you collect points. These points can be redeemed later for cash, gift cards, travel, or other merchandise. There is, however, some difference in how companies allocate these points. Some of them would give you equal points for all purchases. No matter what you buy – cosmetics, clothes, or furniture – you will receive the same points for the items you bought. Other companies, in contrast, give extra points for certain categories of goods or services. You may get extra points, when you buy groceries, pay for a dinner in a restaurant, or fill your car with fuel at a gas station.
Travel Rewards Cards
There are also travel rewards credit cards. If you fly frequently, this type of the reward card may suit you well. What you need to know in this regard is that there two kinds of travel rewards credit cards. One is general purpose credit cards that pay rewards on all travel purchase. The other is brand-specific credit cards that pay rewards on purchases with a specific airline or hotel.
If you have preferences for a certain airline, flying only with it, the second type is for you. The brand-specific credit card will suit you more also if you prefer staying in certain hotels whenever you go. When you specify what airline you prefer and in what hotels you stay, you earn more travel rewards with brand-specific credit cards, if you remain unquestionably loyal to your chosen brands. On the other hand, if you hunt for lucrative deals, prefer flying the cheapest airline, and choose hotels that offer less expensive services, then you should order the general-purpose travel rewards credit cards.
You can use rewards offered by various rewards credit cards for different purposes. The cash rewards can help reduce your credit card balance. With travel rewards, you can travel to different places more often than you usually do, because they allow you to have trips for free. Or on a lesser scale, you can use rewards to purchase holiday and birthday gifts. There are also different possibilities to invest your rewards, either putting them into your investment account or using them to reduce your mortgage.
Plain Vanilla Cards
Those of you who do not seek to receive rewards on their credit card may apply for so-called plain vanilla credit card. In the world of finance, the concept “plain vanilla” refers to the most basic version of a financial instrument. It is the opposite of an exotic instrument, which changes the components of a traditional financial instrument, which results in a better security. It might help you understand what the plain vanilla credit card is, if you think about plain vanilla ice-cream. Just as plain vanilla ice-cream does not contain fruits and nuts, the plain vanilla credit card does not offer any additional rewards. It allows you to have a revolving balance up to a specific credit limit. When you make a purchase, you use up your credit. After you pay, you receive more credit. At the end of the month, a finance charge is applied to outstanding balance. But note that plain vanilla cards have a minimum payment payable by a certain due date. You will be fined if you are late with your payment.
It is clearly more pleasant to receive rewards when you use your credit cards. Yet what you need to keep in mind is that not all rewards are offered infinitely. Some reward programs nullify your rewards if you do not use them by a certain date. If you do not make your credit card payments on time, some programs also forfeit your rewards. Therefore, when you use credit cards with rewards, you should be accurate with your payments, if you wish to continue enjoying your benefits.