Understanding Credit Card Rewards

Nowadays, just about every credit card comes with some sort of rewards system. How do you decide which is the best fit for you?

Types of Credit Card Rewards

Generally, rewards fall into one of three categories: cash back, miles or points. It is essential to understand what type of reward system is attached to your credit card because each offers unique perks for the cardholder.

  • Cash Back: Cash back rewards are the simplest and most common — when you use your credit card for purchases, you get a percentage of that money back. It’s easy money back in your pocket in exchange for your regular spending.
  • Miles: Designed for the avid traveler, miles systems reward credit card use with travel miles. These miles can be used for reduced airfare, car rentals or free hotel stays.
  • Points: Points systems offer a certain amount of points based on each dollar you spend. For instance, our Experience Michigan First Rewards® VISA® rewards 1.5 points per dollar on every purchase made in Michigan and 1 point for everywhere else. Depending on the card, these points can then be redeemed for anything from gift cards to merchandise to charitable donations.
How to Pick the Right Rewards System

Choosing the right rewards card starts with looking at your lifestyle. Only sign up for a reward card if it offers benefits that you need and can see yourself taking advantage of. For example, if you rarely travel, you won’t get the full bonus of a miles card. Compare offers from various credit cards online to determine which system is most beneficial for you.

The Disadvantages

While many rave about the benefits attached to reward cards, it’s easy to overlook the disadvantages. The biggest drawback is that reward cards can sometimes prompt you to overspend in order to earn those rewards. Be sure to avoid any unnecessary purchases and think of rewards as just that, a reward — not a motive to spend more.

Next, credit cards with reward systems can often come with some high annual fees or interest rates. Before you commit, make sure you’re aware of any fees or fine print that come along with a new card.

Finally, avoid opening new rewards cards on impulse. When too many credit cards stack up in your wallet, it becomes easy to forget about all of the rewards you have access to. Remember to frequently check the expiration dates of your rewards so you don’t miss out on any special or seasonal discounts.

For more information about our Experience Michigan First Rewards® VISA® — which features no annual fee, low interest rates, and unique Michigan-based perks — give us a call at 800.664.3828.

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