Make the Most of Being a Star Credit Card User
Once again we have some great information from guest writer Odysseas Papadimitriou:
If you already have an excellent credit score and you pay your bill in full every month, what’s next? You don’t need to improve your credit standing or lower the cost of your debt, but don’t you deserve a reward for your responsible use? You sure do. In fact, there exists a credit card genre designed specifically for this purpose: rewards credit cards.
Rewards credit cards are an often desired, often misused spending vehicle. Many people get them simply because they seem exciting but don’t really consider what type of rewards to get, if any at all. You see, rewards are really only meant as a perk, a lucrative garnish for your credit card spending. If you aren’t an ideal credit user, a rewards card won’t be the most rewarding option for you. However, if you do have excellent credit, you must carefully determine whether points/miles rewards or cash back is right for you in order to avoid wasting your rewards opportunity.
Points and Miles
Many rewards credit cards allow users to accumulate points and miles that can be redeemed for goods and services, like free airfare and hotels as well as VIP access and treatment. However, the number of points or miles needed for certain rewards is not fixed. Credit card companies can change the amounts needed for redemption at will, devaluing already earned points and miles in the process. This ability makes these cards sensible for frequent travelers—those who rack up at least 30,000 air miles or 20 hotel nights per year—because only they can redeem extensively enough to effectively negate devaluation.
Points/Miles cards are often tied to a particular airline or hotel chain in the same way that a store card is tied to a certain retail establishment or a gas card is connected with a particular gas station. Airline credit cards and hotel credit cards provide users very lucrative rewards that are earned at a significantly higher rate when they patron the particular organization tied to their card. With a Hilton credit card, for example, you earn six points for every dollar spent at Hilton hotels and three points everywhere else. Therefore, you should only use an airline/hotel card if you are brand loyal in your frequent travel.
If you require logistical variety, more flexible travel rewards credit cards exist. With the Capital One Venture Rewards credit card, users earn miles that can be redeemed for any purchase made through a travel agency or on a travel-related website. Still, you should not get even a flexible travel rewards credit card if travel does not represent one of your main expenses. While travel rewards may seem exotic and perfect for lowering the cost of your annual family vacation, other types of rewards will actually prove more lucrative in the long run.
Cash Back
If you do not travel extensively, why not simply garner rewards as cash? Cash cannot be devalued and can be used to buy anything anywhere. Cash rewards can also be redeemed easily either though statement credits or in check form. The only downside of getting cash back is that many people view these rewards as extraneous. They see them as perks that can be used to fund frivolous purchasing instead of making normal spending effectively cheaper. In using a cash back credit card, one must remember that a dollar is a dollar and to treat cash back rewards like any normal income.
Ultimately, as with any type of credit card, maximizing the benefit of your rewards credit card requires proper use. The most crucial aspect of this is selecting the right type of card for your lifestyle. You want the card that gives you the best rewards on the most frequent basis possible. Whether this ends up being an airline/hotel card, a generic travel rewards credit card or a cash back credit card is entirely up to you. So choose wisely, sit back and enjoy the perks of having excellent credit.
This article was written by Odysseas Papadimitriou, CEO and founder of CardHub.com, an online marketplace for credit card offers and gift card exchange.
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