Getting rewards for something you already plan on doing is always a good thing, right? If you’re getting rewarded for going to the grocery store, you’ll likely be pretty happy. That’s the idea behind reward credit cards: you’re already spending money. Why not get rewards for spending that money?
However, there are some things about reward credit cards that you need to know before you sign up for one.
A reward checking account has a lot in common with a reward credit card. Both of these products offer ways to get cashback on your spending. Each of them also works on a wide variety of purchases–but check the fine print to make sure that your card does not have exclusions. Just like when the rewards from your checking account apply online, the rewards from these credit cards apply on purchases you make either in-person or online.
Generally speaking, a reward credit card will have better returns than a reward checking account. This is because credit cards charge interest on your purchases if you carry a balance from month to month. Checking accounts, on the other hand, don’t usually charge any fees. To offset this, however, some reward checking accounts pay out interest on your balance, which could make them more desirable for some customers.
The most common rewards cards usually offer you a set amount of cashback on your purchases. Some of these cards might be specialized to pay out higher rewards on very specific types of purchases, like airfare or dining in certain restaurants. These cards are ideal for business people who travel a lot.
Others might offer higher percentages back on grocery store purchases. Some simply give you a flat rate on all of your purchases. These can be a great option if you’re good at paying your balance every month so you’re not accruing interest.
Another type of reward card is points-based rewards. These cards often reward users in the form of airline miles or other perks that can be redeemed once you’ve built up a cache of points. While airfare is one of the most common incentives, some cards have points that can be redeemed for Amazon credit, prizes, and even just credit for your card statement.
The bottom line is that these cards can be great for your finances if you’re comfortable using a credit card and paying back your balance every month. If you’re more comfortable with using a debit card, consider going with a reward checking account instead.