Credit Cards Reward Guide

Question 1

What are the 3 types of Rewards Currencies?

Answer 1

Cash Back
Miles
Points

Question 2

What is a Cash Back reward?

Answer 2

A Cash Back reward provides you with a certain percentage of your purchases back to you.

Question 3

What methods can you use to get Cash Back?

Answer 3

Statement Credit

Check via Mail

Question 4

What are the two types of credit card miles?

Answer 4

Those tied to a specific airline (co-branded credit cards)

Generic miles that can be put toward any travel-related expense (not tied to a specific airline)

Question 5

What are the three Earning Reward structures?

Answer 5

Initial Bonuses
Spending-Based Rewards
Anniversary Bonuses

Question 6

What is an Initial Bonus reward?

Answer 6

It has become standard for credit card companies to offer well qualified new customers what amount to signing bonuses. More specifically, they’ll give you a lump-sum rewards bounty after you make your first purchase or as a result of spending a specified amount during the first few months that your account is open.

Taking advantage of an attractive initial bonus is a great way to supplement another card’s ongoing earning rate.

Question 7

What is a Spending-Based reward?

Answer 7

The most common way to earn rewards is by making purchases with your credit card. You should strive to get a card that offers attractive earning rates in your biggest expense categories. In most cases, no rewards are given for cash advances, balance transfers, or the use of checks provided by your credit card company.

Question 8

What is an Anniversary Bonus reward?

Answer 8

Some credit cards will even give you a free flight, hotel night, or a certain amount of points, miles or cash back each year on your account anniversary. This is often done to justify an annual fee, and you have to make sure the juice is worth the squeeze before agreeing to re-up.

Question 9

What are the 6 non-cash redemption options?

Answer 9

Check
Statement Credit
Gift Cards
Merchandise
Charity
Special Experiences

Question 10

Why can’t i get approved for a rewards card?

Answer 10

Attractive rewards credit cards may have more stringent underwriting requirements than some of their counterparts due to the value of their perks.

Question 11

How often should I use the miles I receive from my rewards card?

Answer 11

Make sure to use these travel rewards within 12-18 months as they may be devalued.

Question 12

Which rewards credit cards have a low interest rate?

Answer 12

This question is indicative of a flawed approach. Credit cards tend to offer either great rewards or a low interest rate, but not both.

You should isolate debt to a 0% APR card.
You should pay off your debt every month on a rewards card to avoid costly APR rates.

Question 13

What is the best initial bonus on an award?

Answer 13

Cash is usually the best option because it affords you more redemption flexibility than airline miles or hotel points. Plus, cash makes it easier to determine how much the bonus is worth before you submit an application.

Question 14

What are 6 Common Pitfalls and Complaints regarding rewards cards?

Answer 14

Earning Limits
Rotating Categories
Redemption Versatility
Rewards Devaluation
Rewards Expiration
Rewards-Based Overspending

Question 15

What is rewards Earning Limits?

Answer 15

It’s common for rewards programs to implement monthly, quarterly, or annual earning limits - either in certain spending categories or across the board. This enables issuers to control their profit margins by applying a ceiling to the value that you extract from their products.

Question 16

What is rewards Rotating Categories?

Answer 16

Rotating categories enable issuers to advertise a high maximum earning rate without actually paying anything close to that in practice. For example, you may have seen offers touting the ability to earn 5% cash back in popular spending categories that change on a quarterly basis. The problem is that you have to sign up for the ability to earn that rate each quarter when the updated discount categories are announced.

Not only is it likely that you’ll forget, but you’ll have no way of knowing how much you stand to benefit from quarter to quarter.

Question 17

What are two key questions that you must ask yourself when considering a rewards credit card?

Answer 17

What can I redeem my rewards for?
Do I stand to get a good value on redemption?

Those are two key questions that you must ask yourself when considering a rewards credit card.

Question 18

What is rewards Redemption Versatility?

Answer 18

What you can redeem your rewards for.
Do you get a good value on redemption?

For instance, not all points and miles carry the same dollar value, and not all issuers work with the same airlines and hotel chains.

Question 19

What is Rewards Devaluation?

Answer 19

When rewards are issued in the form of points or miles, issuers typically set plateaus you must reach in order to redeem these points/miles for certain goods and services.

However, these plateaus are not guaranteed to be static, and whenever an issuer increases the number of points/miles needed for redemption, the points/miles you have saved effectively become worthless all of a sudden.

In order to avoid rewards devaluation, it is recommended that you redeem your points/miles as frequently as possible. This will not only minimize the number of points/miles that are vulnerable to devaluation at any given time, but will also allow you to benefit from your rewards credit card more often.

To be able to redeem frequently you must of course, open a credit card offering rewards on something you purchase frequently. Or, as mentioned above, you could just go for a cash back credit and avoid the hassle altogether.

Question 20

What are the 5 smartest ways to use a rewards credit card?

Answer 20

1. Pick the right credit card
2. Get the sign-up bonus
3. Use the card for the right purchases
4. Cut down on overspending
5. Pay your balance in full

Question 21

What are credit card rewards?

Answer 21

Credit card rewards are cashback, airline miles, or points that credit card issuer gives to cardholders in return for using their card.

Cardholders can earn rewards for things like making purchases, meeting an initial spending requirement, adding an authorized user or referring a friend.

Question 22

What is the purpose of credit card rewards?

Answer 22

The purpose of credit card rewards is to entice people to apply for credit cards and to spend more money once they have those cards.