Rewards Card

What is a rewards card?
A rewards card is a credit card that offers benefits to its user every time it is used to make a purchase.

What type of rewards are available with a rewards card?
One common type of rewards card offers cash back. The amount of cash back is typically based on a percentage of purchases (i.e. 1% of purchases). Another common type of rewards card earns airline miles for every purchase, which can be used to earn free flights (i.e. 1 airline mile for every dollar in purchases). Other benefits from using a rewards card are offered in the form of 'points', which can be used to purchase a variety of products and services.

-- Credit Tip by FindLocalBanks.com
Federal law requires that all creditors must state the cost of their credit in terms of an Annual Percentage Rate (APR). This rate takes into account how the loan is repaid on a yearly basis, and allows you to accurately compare the cost of credit among lenders. For example: You borrow $1000 for one year and pay a finance charge of $100. If you can keep the entire $1000 for the whole year and then repay $1100 at year’s end, you are paying an APR of 10 percent. But if you repay the $1000 and finance charge (a total of $1100) in twelve equal monthly installments, you don’t really get to use $1000 for the whole year. In fact, you get to use less and less of that $1000 each month. In this case, the $100 finance charge amounts to an APR of 18 percent.

What kind of interest rate is available on a rewards card?
If the rewards card allows you to carry a balance for longer than a month, the interest rate is likely to be higher than credit cards that do not offer rewards.

Is a rewards card right for me?
If you pay the balance on your rewards card every month, using a rewards card can be an excellent way to receive benefits for frequent card use. However, if you do not pay your balance in full every month, the interest charges on the outstanding balance could offset the value of any rewards you have received by using a rewards card.

-- Credit Tip by FindLocalBanks.com
The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.

Things to consider when shopping for a rewards card

• Does the rewards card charge an annual fee? If so, see if you can find a comparable rewards card that does not charge an annual fee. If you cannot find a comparable card without a fee, make sure that you will use the rewards card enough so you can earn enough rewards to offset the fee.
• If you are seeking airline miles as your preferred reward, try to find a rewards card that offers miles for the airline of your choice. An even better option is to find a rewards card that offers a choice of airlines with which you can use your miles.