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What are credit card rewards?


Alex Ritchie

Alex Ritchie


A rewards credit card is a type of card that allows you to earn points on your transactions, and then redeem them for various ‘rewards’. 

There are a multitude of different ways credit card companies will give back to their customers, and it’s important to choose a rewards card that suits your interests.

The different reward types include:

  • Travel rewards: Frequent flyer miles, flight upgrades, travel insurance, accommodation and transport.
  • General rewards: Electronics, appliances, fashion items, tickets to stadium events etc.
  • Cashback: This is when you receive credits on your card based on a percentage of what you’ve spent and how you’ve spent it. This can include earning a percentage of your retail purchase back, supermarket vouchers and more.

How do credit card rewards programs work?

Rewards programs operate under a points system, in which specific transactions earn a range of points. Points are then redeemed in a rewards store for such things as a new TV, a gift card or a microwave. The points value of your transaction depends on your credit card company’s policy, but they can range anywhere from 0.5 – 3 points per dollar spent. 

There are many ways you can earn points. Some cards will offer you bonus points when you sign up for the card, or when you spend a specific amount in a specific timeframe. You may also be eligible for points when you spend money at specific retail or grocery stores. 

Hey big spender! 

Be aware that credit card companies often cap the amount of points you can earn. If you’re looking to get as much bang for your buck as possible, look for a credit card that does not have point caps. 

Points can also expire, so double check if this applies to your rewards credit card as you don’t want to have spent a long time saving your points only to lose them all.

What credit card rewards traps should I avoid?

They say the best things in life are free, but this isn’t always the case with rewards cards.

Rewards credit cards notoriously have some of the highest annual fees out there. To avoid getting stung, choose a card with points that will cover the cost of your annual fee.

They also carry higher interest rates than your standard credit cards, so if you’re the kind of person who can have trouble paying your bill each month, rewards credit cards may not be for you. 

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