Back To The Basics: An Introduction To Different Types Af Reward Points

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Rewards points allow you to earn cashback, points, or miles, making shopping with a card more valuable than paying with cash or a debit card. Credit cards that offer cashback, points, or miles provide different ways of redeeming your rewards. Here’s a primer on how to understand rewards systems.

What is a Reward Card, Essentially?

It’s crucial to understand what constitutes a rewards card before diving into a credit card rewards program. A rewards card allows you to earn cashback, points, or miles when you purchase.

These cards either offer flat-rate rewards or the same amount of rewards on every purchase, or bonus rewards in specific categories (such as increased earning rates on dining out or groceries).

Only new purchases qualify for rewards with scan code; balance transfers and cash advances do not.

Cash, points, and miles are the three most common types of rewards.

Cash Rewards

Cash rewards are the most basic and simplest to use, although they do not always result in money in your hand. Some companies will only let you use your cash rewards as a credit to your account.

The redemption of rewards as a statement credit lowers your balance, but it does not qualify as a credit to your account.

Your cash points may also be redeemable for gift cards through your card issuer’s merchant partners. A minimum redeem amount, or the obligation to redeem your points in specified increments may apply.

Reward Points 

The number of points you get is governed by how much you spend. For example, you can receive two points for every 100 rupees spent on items. In addition, you may be able to redeem your rewards for gift cards, cash, or even vacations, depending on the card issuer.

Automobile reward cards and hotel reward cards are two examples of point reward cards.

Travel Rewards

Miles may be redeemed for airline tickets using travel rewards cards. The number of miles you may earn differs by credit card, and the number of miles required to book a ticket varies per frequent flier program. Although you may be able to convert miles between schemes, you may lose points in the process.

Tiered vs. Flat Rewards

There are two basic types of rewards schemes. You may be eligible for a flat rate of rewards on all purchases. For example, a credit card may reward you with 2% cashback or two points for every hundred rupees spent. You may also receive various incentives based on your shopping habits. For example, some travel credit cards provide more benefits for travel expenses but lower rewards for all other spendings. 

What to Look Out For

A good credit score is usually required to qualify for a rewards credit card. If your credit score isn’t that good, you may have difficulty being approved for a rewards credit card. 

Credit card companies may update their rewards programs at any time, so read everything on your billing statement carefully. Annual fees and interest rates on reward cards are usually higher than other cards.

All awards do not last indefinitely. If you don’t utilize your reward points within a specific length of time, several reward schemes will expire. Most reward programs will lose benefits if you fall behind on your credit card payments.

Picking the right rewards credit card helps you earn great benefits from your credit card purchases. But you need to be mindful of your purchases.

Final Thoughts

Several reward points cards are available, but finding the right one for you may require some research. If you need assistance, get in touch with our professionals. Keep in mind that you may require more than one reward card. By mixing and matching travel, points, and reward cards, you can select a combination that provides you with the most value from all of your spending.