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Why Do Companies Give You Rewards When Using Credit Cards?

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Discover If This Strategy Should Give You Rewards for Your Purchases

Have you ever wondered what makes travel and retail companies reward their credit card members?  The great new marketing strategy is for businesses to give you rewards for using certain credit cards.  Many people are choosing to use cards over cash on purchases and credit card providers have noticed.  The reward programs are developed to lure in new customers. The ideal is to bring more customers in to open an account and then continue to use the card for purchases.  It’s a genius marketing scheme! The credit companies give you rewards for using their card over any other and they profit from an increase in sales.  Let’s take a look at how some of these rewards are paid out.

Credit companies give you rewards in several different ways.

  • A point system that can be redeemed for discounts, statement credits, gift cards, and more.
  • A percentage of cash back on your purchases.
  • Airline miles that can be redeemed for further discounts and flights.
  • Brand spending discounts with specific store rewards only available by the issuing retailer.
  • Hotel points that can be redeemed for discounts and free stay’s at select hotels.

Find the best rewards program for you.  

If you plan to travel a lot for business or pleasure you may want to stick with a credit card that can give you rewards for travelling.  The rewards on these cards can benefit you with airfare, hotel stays, and discounts.  Some rewards credit cards even offer rewards for quicker escort through security, air traffic delays, and airport lounge access during waiting periods.  However, if you don’t travel that often you may want a card that will give you rewards for making purchases.

If you want a card to give you rewards on your purchases you might want to consider a cash back reward or brand loyalty credit card.  Many cards give you rewards on gas, groceries, and department store shopping.  This is done in rotating categories by offering 2%-3% cash back on your purchases.  If you are loyal to a specific retailer it would be beneficial to use a brand rewards card.  These cards will offer cash back options on purchases made in-store and a smaller percentage back on purchases made elsewhere if applicable.

Watch for traps in your rewards cards.           

Not all cards offering cash back or brand loyalty are rewarding.  In fact, some can hurt your credit and spending in the long run.  Applying for a store credit card does mean a hard inquiry on your credit report so choose wisely on which you apply to.

Although, these stores want to give you rewards they do come with a higher interest rate.  Always check the rates before applying and make sure it’s the right card for you.  Also, your starting credit limit may be low and you can easily find yourself overspending.

Make sure to read all the literature and weigh the pros and cons before applying for any brand loyalty card.  Just remember that rewards are designed to make you feel like you are the one making money.  However, it’s the credit companies making money off of your spending.  If you follow these tips and use the card responsibly, you should be able to find the right card to give you rewards.

 

Related links

Credit Cards, Debit Cards, or Cash – Which is Best?

Why Would the Credit Card Company Give You Cash Back? Would the Credit Card Company Give You Cash Back?

Picking a Travel Credit Card a Travel Credit Card

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