What are credit card rewards?
Lenders offer credit card rewards to help you get more from your spending. These rewards come in the form of points, which can then be used to secure discounts and/or complimentary items.
The more you spend with your credit card, the more points or rewards you can accumulate. Additionally, you can score a lump sum of points when you apply for certain new cards. There’s no reason to not reap the rewards, so let’s learn a little more about these cards.
Types of reward programs
There is a variety of reward programs out there that suit all kinds of spending habits. Are you a traveller looking to go the extra distance for frequent flyer points? Are you looking for returns on your day-to-day shopping and expenses; at the supermarket or the petrol pump? Or are you seeking complimentary insurances to accompany your new card?
We have detailed the most common types of reward programs to look out for when comparing your credit card options.
- Retail rewards: Everyday spending is where you’ll tally the most points. Potentially, you can earn extra points when you buy from certain retail brands or shop at preferred stores.
- Supermarket rewards: Earn rewards for purchases made at your favourite supermarket.
- Petrol rewards: Earn rewards for refuelling your vehicle. In return, you’ll be eligible for fuel vouchers or discounts at the pump.
- Frequent Flyer rewards: Earn rewards towards your preferred Airline Frequent Flyer program.
- Cash back rewards: Accrue points which you can use to redeem cash back.
The pros and cons
The idea that you’ll receive rewards for your spending almost sounds too good to be true. No doubt you’re probably wondering, “What’s the catch?”
To make sure you get the best deal out there, here are the important considerations you should make when comparing rewards programs.
Make sure you take into consideration any interest rates you could be charged. Will your charged interest outweigh the rewards you accumulated?
Does the card also offer interest-free days? Without those, will you be paying more for your purchase from the moment you use your card? Once you find out the details, take into account how your interest-free days affect the rewards you gain from purchases.
Will you be charged an annual fee? Depending on the type of reward program you choose, you should expect one with your card, so make sure it’s something you’re comfortable paying before applying.
What are the repayment options on offer? If you haven’t paid off the balance by the time the repayment is due, the interest accrued might outweigh the rewards gained.
How much will you need to spend before you can claim your rewards? Is it more than you think you’ll spend in a month/year? If it is, you might be better off looking at a lower interest rate and using the savings made in place of the rewards. Additionally, the points expire after a long period of inactivity on the card, limiting your opportunities to use them in the future.
Ready to compare your options? Find the right card with the right rewards program today.