Credit Card Reward Points: Truly Valuable, or Just a Gimmick?


Many credit card companies offer rewards benefits designed to encourage the consumer to constantly spend money. Despite offering rewards, they are in business to make money. However, if you do your homework and use credit wisely, you can still benefit from credit card rewards. If you find yourself debating whether to take advantage of your credit card rewards, or stick to what you know, read on for a little advice about rewards and the true weight of their value:

Rewards Options

Credit card rewards include travel perks, cash back and discounts on purchases. Travel benefits consist of free airline miles or free hotel stays. For these rewards, you may receive discounts when shopping at certain stores or online websites. These discounts are typically in the form of cash back, which means you are earning a percentage of cash back on purchases. Generally the amount can range from 2 to 5%, with the higher percentage available only for select purchases. In addition, you can earn discounts on purchases.

Rewards Tips

Read the fine print to understand how rewards benefits work, as they differ from card to card. It is most important that you pay off your credit card each month to maximize your rewards and save on interest. Many people get distracted by rewards and shop places they normally wouldn’t, or buy things they shouldn’t. Avoid overspending by purchasing only those items you would have bought anyway.

Rewards Risks

When weighing the pros and cons of a rewards credit card, consider the annual fee, which can range from $50 to $100 per year. The higher the fee, the less likely you might be to recoup the cost through the rewards program. Evaluate the limitations. Do you receive mileage points only for certain airlines or select times of day? Do you need to spend a certain amount per year before earning rewards points or are they valid for only a limited time?

Rewards Redemption

Make sure you’re aware of how rewards are redeemed. For example, some cards rely on a rewards point system instead of cash, and the dollar value of each point can vary widely depending on how you redeem your points. Find out how many points you must earn before you can redeem them. In addition, points may decrease by as much as 50% if you redeem in certain categories. Evaluate the guidelines so you can redeem your points or cash in a way that makes the most of your rewards benefits.
Credit card rewards provide many benefits. However, if you’re not careful you can fall into the trap of heavy debt for the perceived rewards savings. The Federal Reserve Bank of Chicago conducted a study demonstrating that cardholders often spend more per month than the cash back received. Debt and rewards can quickly cancel each other out, so use your credit card and your rewards benefits wisely, and your credit cards will hold more value for you. The information for this article was provided by the professionals of Keith G. Collins Ltd., who specialize in counselling Winnipeg.


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