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In an effort to overcome the competitive nature of the credit card market, credit lenders are turning to offering reward programs to gain an edge over their competitors. Countless types of reward programs exist, and credit lenders are offering cash back for purchases, airline “frequent flyer” miles, cruises, luggage, and points that can be used to purchase merchandise from specific stores are some of the more popular forms of credit card reward programs.

Often, cards will offer you reward points for every specific amount of money spent using the card. You can accumulate the points, and then when you have enough for the trip or cash back that you’re “saving” for, you cash them in. The theory of reward points is excellent, it’s like a bonus- you are going to use your credit card to make purchases, so why not earn something for the purchases you have to make anyway? There are a few loopholes in reward point programs, and some fine details that you should research thoroughly and take into consideration when choosing a credit card based on the rewards programs the lender is offering.

First, the reward points can change in value. It’s similar to a credit card company changing their interest rates- all the lender needs to do is notify the cardholders of the change and give sufficient notice before the changes take effect. If you are planning to use your reward points for a vacation, or to purchase airline tickets, don’t be surprised if by the time you have enough points to cash in the points don’t have enough value. You’ll need to keep a close watch on each of the “changes in credit card agreement” notices that come in the mail, as the details of your reward points programs can be found within them, and if changes are to take effect, you’ll learn about it in those documents. Some card owners are reporting that when they have the required number of reward points to book a flight or take the trip, there is no room on the plane to go! Many people are choosing cards based on their reward points programs, and as enough people are obtaining the points they need to cash in and travel using them- the planes are often booked a year or more in advance for the trips that can be purchased with reward points.

If you only use your credit card in emergencies, or for small purchases that you pay back immediately, a card that offers reward points may not be the best option for you. Typically, cards with reward points have an annual fee associated with having the credit card. It is how the credit card lender can provide the rewards, so you’ll need to consider your spending habits, how much the card will cost you per year, and how much in rewards you think you can accumulate in order to decide if the annual fee associated with the credit card offering the reward points will be beneficial to you. If, on the other hand, you plan to use your credit card for major purchases, or for many purchases, paying the annual fee might still be worth the amount you can earn in reward points. In order to decide if a reward points program will really “reward” you, you’ll need to spend the time doing the math based on your spending habits.

Another aspect of your credit card usage habits you should consider when you are deciding whether or not to take a credit card that offers a reward points program, is whether or not you tend to carry a balance on your cards from month to month, or whether you typically pay the entire amount on a regular basis. Most credit card lenders that offer reward points programs tend to have a higher interest rate than the cards that do not offer reward points programs, so if you keep a balance from month to month, it may not be wise to select a card for the rewards points program because you’ll pay more in interested on your debt. On the other hand, if you usually pay off the entire balance of your credit card, you won’t be effected by the higher interest rate and will benefit from the reward points.

Consumer Reports Magazine has a few credit card lenders on their suggested credit card list based on the amount of rewards they offer compared to the amount you’ll pay in annual fees and interest rates. These cards include American Express Blue, GM Mastercard, and Disney Visa.

Phil Edwards is a Business analyst in the city of London, freelance writer for
several finance magazines and websites and co-owner of http://www.1st-uk-credit-cards.co.uk, http://www.cards4uk.co.uk and Health and Beauty

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