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Credit card issuers need business. To attract it, many are offering ever more attractive rewards programs. And more often than not, these rewards programs come with lucrative bonus offers. For instance, the new Chase Sapphire Reserve card provides consumers with a mind-boggling 10o,000 bonus airline miles as long as they spend $4,000 in the first three months in which they own the card.
With so many rewards cards, all offering lucrative incentives, it can be difficult to determine which card is best for you. You might even be struggling to determine if you’d be better off with a card that offers you cash back with every purchase you make versus one that provides you rewards points that you can later turn into everything from free airfare to merchandise to gift cards.
What option is best for you?
Not surprisingly, there is no one right answer.
Determining whether cash-back plans or rewards programs will deliver the most bang for your buck requires you to take a close look at your own finances and shopping preferences.
Are You A Shopper?
Do you consider spending three hours at the mall a great way to unwind after a long week of work? Do you flock to your local department stores at 5 a.m. the morning after Thanksgiving? Do you consider the entire winter holiday season an excuse to perfect your bargain-hunting techniques?
Then you qualify as an avid shopper. And if you’re such an animal, you’d probably enjoy earning points with a rewards credit card.
That’s because rewards cards allow you to engage in a bit of online shopping once you’ve earned enough points. Depending on the credit card, you can turn your rewards into gift certificates, airline miles, rental cars, hotel stays and, best of all for the shopaholic, merchandise.
Many rewards cards also come with their own online shopping malls at which you can shop online for hours on end.
The online shopping malls associated with American Express’ rewards cards, for instance, are filled with unique items, from costly pens to fine wines. But what if you’re a more no-nonsense sort of consumer, one who doesn’t have time to hunt for the perfect sweater, wine glass or suitcase?
Do You Like Cold, Hard Cash?
Such cards work similarly to those that offer rewards points: You’ll earn a certain percentage point of cash for every dollar that you charge.
With the most basic of cash-back cards, you’ll earn cash at the rate of 1 percent of every dollar that you charge. When you earn enough cash, you can receive it, depending on your card, as either a credit to your card account, a direct deposit in your savings or checking account or the old-fashioned way, mailed to your home in the form of a paper check.
Read The Fine Print
The truth is, you’ll earn your rewards, whether they come in the form of cash back or points, at the same basic rate. The key to finding the right card for you lies in reading the fine print carefully.
Not all rewards cards are created equally. Some offer you the opportunity to earn more rewards points, or cash-back dollars, when you use your card at gas stations, supermarkets or office supply stores. Others offer incentive programs in which you’ll earn either cash back or rewards points just for signing up or making your first purchase.
Your job as a consumer is to shop for the best possible rewards card you can find. Whether you prefer cash-back or points-based rewards programs doesn’t matter. There are good deals to be found with both types of cards.