Reward Cards: What’s right for you?

Credit cards are great because of the incentives, but it also a prime reason why people get into terrible debt. When opening a new line of credit, it can be tricky to figure out which one is the best suitable for your type of lifestyle.

A lot of credit card companies offer perks to reward users for their loyalty. From travel rewards to cash back rewards, there are tons of different options to choose from.

Because it can be a bit overwhelming to understand the benefits of these different cards (as well as their disadvantages!), the financial experts here at Miss Money Bee have provided a quick and easy way to glance at the three major types of reward cards:

Rewards cards:

With these types of cards, users can accumulate points with each purchase they make. These points can get perks like travel and hotel discounts, major retail savings, gas rebates and gift cards. There are many different types reward cards, and consumers should open one according to what benefits them the most. For example, people who travel a lot for business should open a frequent flier card to gain mile points. Others, who have a broader lifestyle, should get one that simply gives them an array of benefits, like gas or shopping rebates. Some companies offer different perks during different seasons, so you’re not “stuck” to just one benefit.

Certain reward cards require an annual fee to be part of their loyalty program, while others may waive it depending on your credit history. Generally, this card will require a good credit standing just for approval. People who normally pay off their balance each month should opt for reward cards.

Cash Back Cards:

A cash back card is actually a type of reward card because the incentive to use it yields cash right back into a person’s account…and who doesn’t like free money? Cash back cards will take, for example, 1 percent of the total purchase value for the month, and credit it back into your account for future use. The amount also changes depending on where the purchase was made. If a particular retail store has a relationship with the credit card company, the user may get up to 20% of that particular purchase value back in cash rewards.

Cash back cards often require an annual fee between $50 to $100 a month, which can be a disadvantage if the user is not receiving more than that amount back in cash. Only consumers who can guarantee a full monthly payment should open this type of card. It’s a great reward for people with good credit.

Low APR Cards:

Credit cards with a low APR charges basically charges the user less interest fees for using the card. Right now, credit card companies are offering credit lines with as little as 0% interest, but this is generally for the intro period, which can last between 6 to 18 months. As of 2013, the average APR is about 13 to 15%, depending on if it’s fixed or variable. The APR offered will also depend on a person’s FICO score. The better score, the lower the APR.

Low APR cards are good for people who may not have the perfect credit because they can still be approved; it’s just that the APR will depend on their particular score. Some companies require an annual fee, others won’t, depending on what benefits they are already offering. Consumers who are beginner credit card users should take advantage of Low APR cards to start a healthy repayment lifestyle.