If you get confused when you go shopping for a credit card, you are not alone.
Rewards credit cards, cash back credit cards, airline credit cards, travel credit cards, auto credit cards, sports credit cards, and charity credit cards…. Every day, it seems, credit card issuers come up with new, creative incentives to differentiate themselves from the competition and attract more customers.
Although sifting through the many offers at times can feel like being lost in a maze, it is well worth your time to take a closer look at the rewards credit card issuers offer. With a little bit of planning, you can earn a 1 to 5% discount on most of your purchases. If you charge most of your expenses to your credit cards, over a year that can add up to real money—for most consumers as much as a tax rebate check from Uncle Sam!
If you find it difficult to choose, here are a few tips to help you. First of all, even though there are numerous types of credit card offers, they basically boil down into two types of cards: cash back credit cards and rewards credit cards.
Cash Back Credit Cards
Like the name indicates, cash back cards give you a percentage cash back on the charges you put on your card (balance transfers or cash advances are not included). Credit card issuers typically pay the rebate either by issuing a check or as a credit to your account.
What’s the advantage of cash back cards? You get money in your pocket to spend however you like. Plus it’s easy to see what percentage you are earning on your charges. A typical cash back is 1%, but many cards offer a higher cash back for certain types of purchases, or when your charges exceed a certain limit. Avoid time-limited offers with a high cash back rate that drops after only a couple of months.
Rewards Credit Cards
Like cash back cards, rewards cards let you earn a percentage rebate on your charges. Only in this case, you don’t get paid in cash, but in points which you can cash in for various types of rewards.
The advantage of rewards credit cards is that you get to choose among numerous attractive offers, including free airline tickets, free hotel stays, various types of merchandise and electronics, gift cards at your favorite stores, and even payments on your mortgage principal.
The disadvantage of rewards credit cards is that it can be harder to compare to see which rewards card gives you the highest percentage earnings, since you are awarded in points on your purchases. Still, if you have the time to look through the offers, there are many exciting rewards to be had in this category of credit cards.
If you want more information, our resource library contains numerous articles about choosing a cash back credit card or rewards credit card and how to maximize the rewards and cash back. To compare all our different types of cash back credit cards and rewards credit cards, you may also want to use our convenient Credit Card Comparison Guide.
