ADVERTISING SUPPLEMENT
THURSDAY APRIL 5, 2012
Cashback reward programmes are designed in attractive formats to grab consumers’ attention and it is essential to know a bit about how they work to help you choose one with the best options
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redit card cash reward programmes offer cardholders a chance to earn money back on credit card purchases. This is a review of the top cash reward cards. The evolution of technology and trends toward convenience continue to drive the growing use of credit cards and electronic forms of payment. The media portrayal of consumer debt, excessive interest rates and hidden fees has given credit cards a negative reputation. However, credit cards can provide tremendous benefit when used responsibly. Besides convenience and consumer protection, credit cards often offer reward programmes that provide additional economic benefits to the cardholder.
Choosing a credit card When selecting a credit card, potential cardholders should consider a number of factors including promotional offers, interest rates, credit limit, reward programmes, lifestyle and how or where they plan to use their card. Although many credit cards offer reward programmes in the form of cash, points or airline travel miles, this article will specifically examine the credit cards that offer the best direct cashback reward programmes. Cardholders that would benefit most from these credit cards are
full advantage of their credit cards reward programmes are paying for something they are not using. Size • Credit card points and miles are earned whenever the credit card is used. The standard model is that for every $1 spent on the card, one point or one mile is earned. However, some cards have special provisions that allow additional points to be earned in certain situations. Branded cards may offer more points for purchases made from that company. For example, a credit card associated with a particular airline or hotel will offer more points for each dollar spent directly with that airline or hotel. In addition, some credit cards offer differing point earnings based upon certain categories of spending, such as offering more points for each dollar spent at gas stations or grocery stores.
Points and miles that are earned may be redeemed for rewards. Rewards also vary greatly from one card to the next. Cards may offer free travel as one of their rewards those individuals that frequently use their credit card as the primary form of payment for many types of purchases, charge a high amount on their card, have excellent credit, desire cashback as a form of reward, and pay their balance off in full with each billing cycle. Carrying a balance and paying interest can negate the cashback benefits provided by these cards. In addition, these cards are a good choice for cardholders who want a convenient rewards programme that does not require additional enrolment or a complex point redemption process.
standing how credit card points and miles work is critical to maximising the value of your credit card accounts. However, there are a wide variety of rewards programmes out there. Terms and conditions, as well as how points are earned and redeemed, change quickly. Even different cards from the same credit card issuer can have widely different rules and point values. The first step to get a grip on these programmes is unTaking you the extra mile These days, it’s not unusual to derstanding how credit card points have at least one credit card that and miles work. earns point or miles. Points can be redeemed for free merchandise, History • During the days of the credit travel or even cashback. Under-
boom, credit card companies were looking for a way to improve the value of their off erings. Annual fees were dropped to zero on many cards, and interest rates were set at historic lows. However, since many credit card issuers used these tactics, something else was needed. Credit card reward programmes that had once been used only on certain specialised cards for niche markets such as frequent flyers were expanded. Even credit cards without individualised, brand name rewards programmes were added to generic programmes such as Visa Signature Rewards, which is offered on cred-
it cards issued by numerous banks. Significance • Credit card rewards are a way to increase the value of a credit card to the customer. However, running these programmes is not free. The money earned by each card has to cover the expenses it generates to make a profit. While some rewards are either purchased at a discount from the supplier or made profi table via another arrangement, the overall cost of running the programme must be covered by revenue generated from the cards. Cardholders not taking
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Benefits • Points and miles that are earned may be redeemed for rewards. Rewards also vary greatly from one card to the next. Cards may offer free travel as one of their rewards. Redeeming points or miles for a free airline ticket is a common use of reward points. Some programmes have a fl at redemption table in which a certain range of total miles flown, or a certain price range of tickets, can be purchased with a specific number of miles. Redeeming 30,000 miles for a round-trip ticket within the US is one common offer. Other rewards are based upon the price of the item, such as 1,000 miles for every $1 the ticket costs. Some cards allow points and miles to be redeemed for cashback or statement credits. Again, some programmes have flat fee rewards.
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