There is a stigma attached to the role of credit cards in the field of our personal finances, and probably rightly so. Credit cards can be a lifesaving addition to your personal finance repertoire and they can also be the reason why your money quickly spirals out of control. However, when used correctly there can be a massive benefit to employ rewards credit cards for specific types of purchases. Like most things in the financial world, many people don’t properly understand the scope and breadth of the tools in their toolbox. Today, we are going to have a frank and honest discussion about the role of credit rewards cards, their uses, and which ones you will want to keep an eye out for in 2018.
What Is A Rewards Card?
Many people incorrectly assume that credit cards are the same across the board. Credit cards are typically high APR% cards that hurt you with interest while giving you enough wiggle room to keep on loading your cards with purchases. Not exactly a great thing, right? Our discussion is bypassing the conventional definition of a credit card in order to more fully look at the prospect of a rewards credit card. Rewards credit cards, or just rewards cards, are credit cards that have a unique set of qualities attached to them in order to give you the incentive to make them your primary focus for purchasing power. Rewards cards, when used correctly, can be a great way to handle your finances while also pulling in passive income and rewards. These rewards could take the form of airline miles, hotel rentals, or even straight up cash back into your wallet. Sounds pretty neat, right?
With credit reward cards you have to be cognizant of a few different things before deciding which card you are going to add to your wallet. There are numerous different rewards cards available from major companies all around the world. Credit reward cards are unique in their offerings but they are also pretty uniform in their standards and drawbacks. Today, let’s break down what it takes to get one of these reward cards while also exploring the benefits and drawbacks associated with them.
Is a Rewards Credit Card Right For Me?
While we all spend money on a day-to-day basis, we aren’t all meant for the same financial methods. Rewards credit cards are specifically beneficial to a certain type of consumer and if you are that type of consumer, you should definitely add one to your wallet. So, what kind of consumer should be on the lookout for a rewards card? Here are the key traits that we suggest you have before you add a rewards credit card to your wallet:
- Excellent Credit – When you have excellent credit, you have the ability to get a credit card with more advantageous terms. The better rewards cards, such as the Capital One VentureOne Rewards Card, require a strong credit score in order for you to benefit from it. If you have shaky credit, you might want to consider patching it up before adding another card to your name.
- Timely Payoff – One of the most important aspects of successfully using a credit rewards card is being able to pay off the balance before carrying on into the next month. Not carrying a balance is key if you want to limit your exposure to high-interest rates. Reward credit cards may sometimes have higher APR than conventional credit cards and that could get you into trouble.
- Frequent Travel – The most common type of rewards credit card is the variation that offers frequent flier miles and hotel benefits. If you are a frequent traveler or plan to become one, there are plenty of rewards credit cards available for you in 2018.
- Purchase Frequently – Finally, if you tend to spend a lot of money on specific categories of purchase, be it gasoline or groceries, then finding a specific rewards card that caters to those industries can be beneficial. If you are going to be spending the money no matter what then you might as well get paid for it.
The Key To Qualifying For a Rewards Credit Card.
Despite the reputation that credit card companies get as opportunistic businesses, the truth is that they want to make sure their cards are put into the hands of people who can use them properly. Qualifying for a quality rewards credit card is a relatively easy task, so long as you’ve spent most of your financial life being relatively considerate with your finances. In order to qualify for a decent rewards credit card, you need to pass several minor aspects.
To start with, you have to be an adult in order to apply for and be granted a rewards credit card. Minors are not allowed to sign up for credit cards and adults cannot sign up for these rewards cards for their children. That just isn’t how it works. After that, you need to have a decent financial profile to be considered for a rewards credit card. This means that the credit card company will look at different elements of your financial history. The company will look at your credit score, your debt to income ratio, and even your housing situation. Do you rent? Do you own?
Fortunately, applying for a credit card is a quick and easy process. Typically, credit card companies will be able to instantly approve or deny you based on your financial profile. There will be times, however, that you are asked to provide further information before the company will render a decision. Each individual company, be it Capital One or Discover, will have their own list of requirements that need to be met.
The Different Kinds of Rewards Credit Cards.
It might be surprising to hear, but there are a wide variety of different rewards credit cards available within the financial world. Each rewards credit card will offer different aspects of benefits that could be tailored to your needs. Taking time to honestly appraise your spending habits can go a long way before you begin shopping for your rewards card. Once you’ve looked inward toward the type of shopping that you do, keep on reading in order to be introduced to the kind of cards available to you.
- Cash-Back Bonus Credit Cards – One of the most popular types of rewards cards, the cash-back credit card is great for frequent spenders in specific areas. Some cards will offer 2% cash-back on gas expenses and groceries while others will focus on entertainment and dining. A standout card for this category is the Chase Freedom card.
- Travel Bonus Rewards Cards – We’ve all heard of ‘frequent fliers’ and now you can become one too. Travel-based rewards cards are great for frequent travelers who want to get a break on their airfare or their hotels. These travel cards are popular in the business world and offer you a variety of different incentives during your time abroad.
- Flat Cash-Back Cards – If you don’t want to pay attention to where you use your card, like in the Cash-Back Bonus Credit Cards category, you can consider opting instead for a rewards card that offers you a flat-rate cash bonus on your expenses. Typically, you will be rewarded in the area of 1% to 2% cashback on all purchases, no matter where you end up buying from.
- Branded Reward Cards – Finally, this special type of rewards card is for the brand-aware individual. If you tend to shop, buy or rent exclusively from a certain business then you’ll likely be glad to know that the aforementioned business likely carries their own personal rewards cards. These cards typically operate on a ‘points’ basis and can be used to redeem for goods and services from the specific brand.