WHAT'S IN YOUR WALLET THIS HOLIDAY SEASON?
If you're like most Americans, quite a few credit cards, that are already getting warmed up for upcoming gift buying sprees. In recent years, there has been an explosion in the number of credit card issuers, and perhaps more confusingly, the types of rewards being offered with those credit cards. So now, not only do you need to consider the rate and terms of your credit card...but what rewards or other benefits it offers. So what types are out there - and which is best for you?
Airline Miles: If you travel frequently, then maximizing your airline miles may be the very best reward. And if you primarily fly on a single carrier, you will do the best to take their affiliated credit card, as they typically offer 'bonus' opportunities to earn extra miles. If you do fly multiple carriers, you may need to use another option, but most reward cards offer airline miles as a choice. But watch carefully, as there are usually restrictions or blackout dates on when you may be unable to use your rewards-earned airline miles.
Cash Back: Discover was the first card to offer a cash back incentive program, and in fact, that marked the beginning of rewards programs in general. There are several items to consider when focusing in on cash back cards, most importantly being the fine print. Some of the better cash back offers do have tiers where you do not earn the most cash back until after certain amounts of spending on a yearly basis. So if you do not use your credit card very often or do not spend enough to make the required spending levels, you can lose out.
Store Cards: Cards issued by particular merchants can be some of the most valuable cards out there if you are a frequent shopper at that store. Typically, you will be given special offers or invitations to sales events, discounted prices, even up to 5% cash back or earned gift cards with that store.
Points Cards: Many rewards cards offer general purpose points that can be redeemed for a wide variety of items, including airline miles, cash back, gift cards from a variety of places, gifts to charity or simply merchandise. These cards can be very beneficial due to the flexibility that they offer - but here are a few general suggestions.
First, do not buy merchandise directly from the reward program. These products, often electronics, are routinely of poor quality or old models. Best way to purchase is to redeem your points for a gift card at a store you can buy the item at, which generally provides more bang for your points than straight cash back anyways. Next, look carefully at all of the reward levels, as sometimes you can get a better reward ratio if you save up your points over time. For example, 1000 points often translates to a $5 gift card, but saving up 6000 points may translate into a $50 gift card - ten times the value for only six times the points! Last, some vendors offer a statement credit versus a cash rebate - and generally offer a higher dollar amount for a credit rather than cash, although the money spends just the same.
The most important advice is to look carefully at the cards you are presently carrying - and know the terms and benefits.