How Does a Rewards Credit Card Work; What Factors Do We Consider While Comparing Rewards Credit Cards?

DUBAI, UAE – (ARAB NEWSWIRE) -- A rewards credit card may be an ideal choice for cardholders who wish to earn bonuses and rewards on their day-to-day spending. These rewards are usually in the form of points, miles, or cashback that can be redeemed for various benefits specified by the card issuer. Cardholders may look forward to the following privileges with a rewards credit card:

• Reward points on both domestic and international spending.
• Exclusive discounts and offers on shopping and dining bills.
• Discount offers on movie tickets, restaurants, and lifestyle spending.
• Complimentary access to selected domestic and international airport lounges.

How does a Rewards Credit Card work? 

Reward points may work differently depending on the terms set out by the credit card issuer. Cardholders may earn reward points through the following methods:

• Making eligible purchases through a rewards credit card
• Reaching the minimum spending requirement
• Signing up as a new cardholder
• Spending in specific categories

 

Upon accumulating sufficient reward points, cardholders can redeem them. This might involve using the accrued points to make purchases directly through the credit card company's rewards program or transferring them to partner programs, such as airline or hotel loyalty programs, and redeeming them for travel-related benefits. Card issuers may, however, impose certain restrictions and expiration dates on the usage of reward points, so cardholders must read the terms and conditions carefully and redeem their accrued rewards accordingly.

Compare Rewards Credit Cards

Comparing rewards credit cards is crucial to finding a suitable card according to one's needs. The following are some factors one should consider when comparing credit cards:

1. Annual Fees

If the credit card comes with an annual fee, cardholders should remember that the benefits should not outweigh the annual fee cost. For example, if one is not a frequent spender, paying hefty annual fees could offset the potential rewards.

2. Interest Rates 

Annual Percentage Rates (APR) are another essential consideration that could impact one's finances significantly. For example, if the cardholder plans to carry a revolving balance on a credit card, a high Annual Percentage Rate (APR) can incur significant interest charges and make it more challenging to pay off the balance.

3. Tiered vs. Fixed Rewards

One should carefully consider the benefits structure of a rewards credit card before signing up. Typically, there are two types of reward structures: tiered and fixed. Tiered cards provide varying levels of rewards for different purchase categories. Conversely, fixed cards offer the same rewards rate for all eligible purchases.

4. Monthly Cashback Rewards Cap

Finally, cardholders should be aware of any caps imposed on the monthly cashback rewards that can be earned. For instance, a rewards credit card may provide up to 2 percent cashback on the first 1000 AED spent each quarter but limit the cashback to 1 percent on any additional spend until the next quarter.

Conclusion

Choosing the right card is crucial for cardholders to get the most out of their rewards credit cards. However, with the sheer number of options available on the market, it can be overwhelming to do so. Before applying for a rewards credit card, prospective cardholders should consider their spending habits and preferences. Upon achieving clarity on their requirements for a rewards credit card, prospective cardholders can begin researching and comparing the features and benefits of their selected cards and eventually choose a card suited to their lifestyle needs.

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