How Do Credit Card Rewards Work?

Almost all credit cards today offer incentives to their loyal customers through reward credit cards. Indeed, reward credit cards have come a long way since Discover introduced the first reward credit card back in 1980. This particular credit card gave cash back on purchases as a bonus for its card members.

Today credit cards not only offer cash back bonuses but provide rewards in various forms and manner. Apart from cash back, some credit cards have frequent flier miles programs, gas rewards, and charity donation programs or a combination of these programs. Additionally, credit cards give discounts and freebies that go along with their particular reward programs.

How do reward credit cards work? Generally, the card holder needs to earn points that are equivalent to gas purchases, free travel ticket, free hotel accommodation, car rental, appliances and other cash purchases. Of course the rewards earned will depend on the type of reward credit card you have. Point systems also differ with every credit card company.

There are hotel reward credit cards that give as much as 5% rebates for purchases or expenses made from participating hotels, airlines, and establishments. Some travel reward credit cards and hotel reward credit cards also give away instant bonus points when the card holder makes his first purchase. Other credit cards award instant points the moment the customer signs up for the card and gets an approval.

When it comes to cash back credit cards, most of issuers give a 1 point or double points for every dollar spent on general purchases. Cash back credit cards usually allow its card holder to earn points regardless of where the purchase was made or what type of purchase it was. For this reason, many consumers prefer to apply for cash back credit cards because they offer more flexibility and more opportunities to collect points.

Apart from the cash back and rewards, these credit cards also come with other privileges. For instance, a lot of credit card issuers offer a 0% introductory period on the APR either for purchases or balance transfers or both. Some reward credit cards come with no annual fees so the card holder is assured that his membership remains active at no extra cost.

Other incentives include free travel accident insurance, car rental insurance, emergency card replacement, emergency cash replacement, reservation privileges and discounted rates from affiliate establishments. Almost all reward credit cards offer easy online application processing as well as an online account access for a more convenient banking. A yearly report of the account holder’s summary of statements is also provided for free.

One disadvantage of reward credit cards is that they usually come with a much higher APR than non-reward credit cards. For this reason, card holders are reminded to make sure that they’ll be able to keep up with their monthly payments to avoid shouldering very expensive interest fees. Reward credit cards that charge for the renewal of membership usually have expensive annual fees. Hence, it is always a good idea to shop around for credit card rates before choosing one.

Lastly, credit card companies usually require applicants to have a good to excellent credit history in order to be granted approval. Thus, if you’re planning on obtaining your own reward credit card, it is recommended to work on your credit and make sure that you have a good to excellent standing.


About the Author

Author: Ann Wilson

Ann Wilson is the head writer of This resource provides consumers with valuable reviews and information on the best credit card reward programs. Its main objective is to help people to take advantage of reward credit cards and start earning reward points. Copyright © 2012

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