Playing Your Cards Right!

We all like a bargain, so when a credit card company asks if you’d like a reward for using their piece of plastic – why not?  You might think that something is better than nothing, but in terms of real rewards you would do well to peel off the wrapping and see how generous that gift actually is.

If a company is offering ‘cash back’, make sure that the cash is worth having and not just small change that slips through a hole in your pocket.  And how easy will it be to earn that cash?  If you need to buy products from certain stores that you rarely visit, it’s hardly worth the effort to apply.  But if the card maximises your reward by following your existing habits, then why miss out on this free cash?

Once you delve into the marketplace you will be dazzled by the deals on offer.  But don’t forget that you are still the customer – and all customers should demand value for money.  Don’t fall into the trap of assuming that every cash back card will pay you lots – some will only offer you a miserly 1% back on your total card spend.  You’re going to have to really hit the shops hard to make that worth having.

But they’re not all so miserly.  Some cards offer a very generous 2% on your supermarket and petrol purchases and 0.5% on everything else.  Even if you never treat yourself, buying the essentials in life will still earn you a nice little bonus.

Cash isn’t the only thing on offer – some cards will tempt you tangible treats – but how hard do you need to work to make that treat tasty?  Some on-line stores offer a car with 1 point for every £1 spent on their website, plus 0.5 points for purchases elsewhere.  1,500 could get you a £15 voucher.   But if your spending habits change and you rarely visit their site, you’d need to spend £3,000 elsewhere to reach that magic £15 voucher.

So why are some of these deals so poor?  Remember, the credit card company is not your friend.  It is a money making machine and it does this by charging interest and fees.  It hopes you are tricked into believing you might get something for nothing, overspend and then fall foul of the interest and penalty charges.

But even if you stick to the rules, you might pay extra costs somewhere down the line.  Some cards are more costly to process by a retailer than others, so the charges they incur have to be passed on – to you!  Overheads have to be absorbed by any business and to keep their profits healthy, a margin for credit card costs will be included in the price you pay.

So how do you know which reward will be worth having?  If you’re tempted by a card that offers you ‘points for purchases’ – how much are they really worth?  Some cards may give you ‘miles for your money’, but for the plane to touch down safely, you need to know how far they stretch. 

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It’s worth viewing these cards in the short-term.  If you’re thinking of indulging in a pricey piece of kit like a new plasma TV or maybe a bright new kitchen, why not consider a card with an interest free period?  Spread the repayments over the period on offer and maybe nail a bargain in the sales and it could be a win, win situation.  Try and match the interest free period with a card that offers a reward too and you’ll really be playing the card game.

But does it always pay to switch to the best deal?  Moving to a card that offers you points per pound spent in a shop you never visit is worthless.  Look at what you buy and why you buy it.  Convenience has to be the margin you build into your comparison.

Apathy costs money!  Check the deal you’re already receiving and then see what you could be earning and match it to your life.  If you don’t always manage to clear your balance in full each month, reward cards might not be for you.  Any interest you have to pay will always outweigh the benefits you might be expecting.  And don’t be tempted to use a reward card to make a cash withdrawal.  Interest will accrue from the day of transaction – even if you clear the balance.   Are you a traveller?  Don’t buy your currency this way and maybe take a different card abroad.  Most reward cards charge a fee for overseas transactions.  Adding 2.75% to that straw donkey from Spain, makes it an even more unwise purchase!

So now you can play the rewards card game and win!  Just remember these rules:

Clear your balance in full and on time

Don’t use a reward card to withdraw cash or buy foreign currency

Leave a reward card at home when you go abroad

Once you know the true worth of a reward credit card, you can use it and win!