Friday, May 04, 2007

Credit Card Reward Programs

When you are applying for new credit cards, take a look at the reward programs they offer. Almost every major credit card company like MasterCard or Visa offers some type of reward program. Some offer cash rebates and others offer merchandise. See which one helps you out the most.

Cash rebates offers with credit cards vary depending on the company. Most offer between 1% to 5% cash back on qualifying purchases. That means that during the year if you spend $20,000 on your card you could earn up to a $1000 back. Make sure you read the terms, though, because many have a cap on how much you can actually earn back. The key to really taking advantage of this option is not to carry a balance and give all your rewards back in interest.

Many people I know save the cash back money and use it to take their yearly vacations. If you are not carrying a large balance on your credit cards and losing it on interest, you will actually be taking your vacation on them. And if you have $1000 to travel with, you can have one heck of a vacation

I personally prefer using cards that offer merchandise for your purchases. Usually you will receive one point for every dollar you spend. Then once you accumulate a certain total you can choose some merchandise. Many of them offer an online catalog to shop from. The credit card companies offer the merchandise in tiers. For instance, you might be able to get a $50 dollar gift certificate for 5000 points, but for 100,000 points you have the option of getting a high-tech outdoor BBQ grill.

I use the merchandise points I accumulate for gifts throughout the year. Especially for last minute Christmas gifts. Everyone likes a gift certificate, so there is a quick and easy gift idea.

I know many people who have learned to maximize these rewards to the fullest. For example, you are use to just writing a check to pay for your utilities every month. Instead, just use the credit card to pay them, and just pay it off each month. It is not an added expense; you are just changing whom you write the check to. They also pay things like their homeowners policies on them and if you can, another big point gainer is paying your property taxes on them. You then can add a lot of everyday purchases and get your point totals very high.

So decide which type of reward program is best for you. You may want the cash rebate over the merchandise. Either way, make sure that you actually get to benefit from them. Check all the terms of your credit card, not all purchases you make will qualify for points or the cash rebate options.

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