Understanding the concept of offering rewards for spending on credit cards

By Leni Parrish on August 29, 2010

A credit card reward is a benefit provided by credit card companies to their customers. Credit rewards usually comprise points that one can gather every time the credit card is used. There are several forms of credit card rewards such as cash back rewards, reward points and other incentives. The extent of the reward is dependent on the usage of the card. Most credit card companies offer rewards for every single time the card is used within the time period of the offer.

The idea behind such offers is to motivate credit card holders to use their cards more often. Of the various reward schemes, the most useful of a customer is the cash back reward. This functions along the general principle of a discount. When a purchase is made under this offer, a certain amount on the total price is returned to the shopper. Some companies choose to mark percentages based on the total number of purchases made. For example you may be given a 2 % cash back reward for every dollar that you charge to the credit card. A variant of this form of cash back rewards is the increment system, by which a sizeable increment is given when purchases made with the credit card reach a certain limit – such as say, $ 50 for every $ 5000 charged to the card.

Those who are interested in availing of a credit card that is offering attractive benefits should be wary. The cost of a card, which includes the interest rates it charges should be considered. Ultimately, reward points and cash back scheme will not match up to the amount one pays as interest. If may be a better option to opt for a card with fewer benefits but with a lower card cost.

Credit card companies have put together several types of rewards. These days you can get anything from virtual points to fly- miles as rewards from your credit card Company. These offers have been stepped up in the recent past. For one, the recession caused a marked decrease in shopping related expenditure. The wave of unemployment coupled with rising inflation has been the cause of much worry for credit card companies, some of which are combating heavy losses. In an attempt to win back customers, find new ones and nudge customers back into spending, credit card companies are offering the works in the name of rewards. Even filling up fuel using a credit card can earn you a reward.

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