The Most Common Credit Card Rewards Every Cardholder Should Know About
We all know the core purpose of a credit card – To enable users to pay for goods and services with accrued debt instead of cash or other payment methods, especially when making large purchases.
However, credit cards offer several other benefits besides helping users borrow money, including convenience, increased security, expense reporting/management, and the opportunity to earn credit card reward points.
While most users understand their cards’ core benefits, many remain blissfully unaware of credit card reward programs their issuers offer as additional perks for using their services.
Therefore, in this post, we’ll dive deeper into the ins and outs of reward programs and share the most common types of credit card rewards every cardholder should know about.
Let’s get started!
Credit Card Reward Programs Explained
To remain competitive, most credit card companies offer unique rewards to cardholders by partnering with different businesses in multiple industries, especially retail, travel, and food. Therefore, credit card reward programs are designed to provide users with tangible and intangible products, services, or experiences based on their usage history and spending habits.
Many modern credit card users choose their card issuers based on their reward programs. For instance, some are looking to save money on groceries, whereas others are looking for special rates or discounts on travel and travel amenities.
However, this doesn’t mean you should neglect the core factors of choosing a card, such as the annual percentage yield, interest, fees, and other terms and conditions.
The 7 Most Common Types of Credit Card Rewards
1. Air Travel Miles
Many credit card issuing companies collaborate with local and international airlines to offer travelers using their cards to purchase tickets and other travel products/amenities. This reward program allows users to earn points that can be used for travel-related purchases in the future, including airline tickets, lodging, upgrade to business or first class, or car rental, to name a few.
Most American credit card issuers offer air miles based on every dollar spent on bookings and travel amenities. To redeem your points, you can log into your account and use them during future travel purchases.
2. Cashback
Cashback is the most common reward program offered by most credit card companies. With this program, users can earn a fixed or variable percentage of the amount they spend on purchases. However, this percentage varies depending on the issuer and their partnerships with other businesses. For instance, some offer a fixed cashback rate of 2%.
Meanwhile, others break it down based on the purchased item. For instance, they offer 5% or more for groceries and 1% on other general purchases. These reward programs prompt users to use their credit cards as their primary financial instrument so they can continue to earn interest and fees.
3. Introductory Interest Rates
Many credit cards use low introductory interest rates and fees to attract consumers to opt for their credit services. Some even go one step further and eliminate interest for a limited period up to a certain spending amount.
Introductory rates are incredibly attractive to users looking to switch their credit card companies. Those with excellent credit scores usually offer the best introductory rates with extended utilization periods.
Similarly, many users with bad credit use this credit card reward type to transfer their balance into a new card and enjoy less interest.
4. Gas Rewards
Many credit card companies in the United States offer discounted gas rates or extra fuel to consumers with long commutes. Since gas is a major expense in most households with personal vehicles, gas rewards are the amount the most sought-after reward types in the credit industry. As a result, many cardholders try to opt for issuers providing the best discounts and offers on gas and related products.
As a result, many companies partner with gas vendors to offer points based on every gallon of gas. To redeem gas credit points, users can check their statements or online accounts and use them to get instant discounts at the point of sale.
This mechanism is simple and effective.
5. Hotel Credit Card Rewards
Some credit card companies extend their travel rewards to include accommodation as an additional perk. They reward frequent travelers via free stays and amenities by partnering with hotels, resorts, motels, and other short-term rental properties in different destinations. Reward partners typically include industry giants like Marriott and Hilton since their rates are typically higher than most hotels and Airbnb.
Users need to collect travel points and stay at their card issuers’ partner establishments to earn accommodation awards. Once they have sufficient points, they can book rooms and amenities via phone call or app. They can also win non-travel items, such as merchandise and cash equivalents.
6. Discounts/Gift Cards
Many eCommerce stores and online retail businesses, such as Amazon and Apple, offer users gift cards with discounts, freebies, and other rewards. For instance, Chase offers new users a $50 Amazon gift card and 2% cash back at gas stations, pharmacies, and restaurants. Best Buy customers can also enjoy 5% cash back for up to two weeks following their account opening.
7. Insurance Protection
One of the most important rewards many credit card issuers offer is purchase protection through insurance, especially when booking rentals or buying expensive items. Insurance can help customers better protect their finances and investments, especially when using products or services they don’t own.
3 Ways to Maximize Your Credit Card Rewards
While most credit card users know about their credit card reward programs, many don’t use these rewards to their full potential. Therefore, here are three ways to maximize your credit card rewards:
1. Opt for All Credit Card Rewards
Like most average credit card users, you’re probably focused on some credit card rewards. As a result, you most likely miss out on several lucrative offers and benefits your card has to offer. Therefore, one way to maximize your rewards is to take advantage of all the perks on offer, including travel miles, points, cash back, discounts, etc.
2. Always Read The Fine Print
Many credit card companies offer additional benefits since they partner with different businesses from several industries. However, due to the complex range of products and services, it’s impossible to generalize these benefits. Therefore, you should always read the fine print whenever you shop from partner stores.
For instance, many credit card companies partner with specific retail chains. Therefore, reward points may not work at other stores. Moreover, many cards offer extended warranties on products, especially electronics.
Another benefit of reading the fine print is to help simplify the redemption process. Many card companies have complicated structures that most average users don’t understand. As a result, they fail to take advantage of the additional value on offer.
3. Choose Credit Card Reward Structures Based on Your Spending Habits
Finally, you should apply for credit cards based on the rewards on offer as well as your financial situation and spending habits. Ideally, you should be looking to save money on your most regular purchases, such as gas, groceries, travel, etc. Different cards prioritize different rewards based on the businesses they’ve partnered with.
Therefore, no issuer offers the same type or level of rewards. If you consider yourself an all-rounder in terms of spending, we recommend opting for cards with the highest cashback rates. With high cashback rates, you can save money and compensate for the lack of other benefits.
Wrapping Up
Credit cards are undoubtedly the most versatile financial instruments users can use to finance different purchases. However, navigating credit card rewards can be overwhelming due to complex terms and conditions and many hidden benefits.
However, understanding the most common types of credit card rewards can help users determine what benefits matter to them the most so they can avail the best options for their use case. For instance, if you travel frequently, you’d fare better with a credit card with excellent travel rewards.
Similarly, families with multiple members would most likely opt for credit cards with the market’s best retail discounts and cash backs.
So, choose carefully and reap the financial benefits from day one.
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