If your aim is to improve your credit or rebuild your credit this year, perhaps learning about alternative credit card options is a good method for achieving this goal. Secured, low interest cards, travel rewards, cash back – there are so many different types of cards to choose from. It is likely that you already have one or more credit cards that you use regularly or perhaps more sporadically – however it never hurts to learn about these cards and how they benefit your financial situation as well as compliment your current credit card payment methods.
Two credit cards that can help individuals rebuild their credit may include Cash Back Cards and Rewards Cards. Typically, individuals will opt for one card over the other and sometimes it is either their primary or secondary credit card depending on their specific needs.
What is a Cash Back Card?
A Cash Back credit card is a card that offers a reward program of sorts to its card holders. In this case, the reward is in the form of a percentage of the amount of money spent. Card holders receive some money back into their account, based on how much they spend. For example, if you spend $2500 each month on your credit card, with a 2% return reward, you can earn an extra $50 each month. This of course means if you are to spend on average this amount each month, you can potentially earn cash back rewards of up to $600 each year. If you are trying to pay off your debts and improve your credit, then this can mean that can some extra money to pay off your debts and credit card bills or to fund other expenses.
Is this card right for you? Some additional considerations to make before getting a Cash Back Card
While this year certainly has seen some improvements to the cash back cards by way of offering some higher reward rates, there are still some considerations to make before opting for this card. First of all, cash back card users will want to make sure that the rewards are the best fit for their spending habits. Next, you will want to keep in mind that there are limits to the amount of rewards you can earn across certain categories and for a given period of time. For this reason, this card may typically be a better ‘secondary’ credit card and used only when needed and when appropriate.
Knowing when a Cash back card is not an appropriate card choice is also extremely important. With that being said, individuals that can not pay off their card balances in full month, perhaps should refrain from using a cash back card of any kind. This is because, interest rates can be higher and the penalties can be even more so when you can not pay it off on time.
Ultimately, if you know you will be spending more each month than you can afford to pay back, then this card may not be the better option. In the end, if this is the case, the high monthly fees you will be charged may far outweigh the amout of cash back rewards you will earn. This situation is certainly not conducive to paying down your debt and improving your credit, so after identifying your repayment behaviour, you can decide if this card will best meet your needs and you can get the most out of its cash returns.
What is a Rewards Credit Card?
While Cash Back credit cards are technically considered ‘rewards’ cards, these Rewards cards offer a wider range of incentive and rewards programs for card users. Offering its users a variety of rewards when making purchases with this card, these rewards range from travel points to gasoline to merchandise and concert tickets points. Again, it is important to align your personal spending habits with your lifestyle needs. For example, if you are a frequent traveller or are saving up for a large trip of some kind, having a rewards travel card can be a great benefit to you. This process would see that you can get the most out of your experiences and your expenses.
Is this card right for you? Some additional considerations to make before getting a Rewards Card
Using the points to book flights, save money on hotels and meals can end of saving you some extra money in the process. Additional benefits of rewards cards can mean that users have access to various rewards privileges including, travel accident insurance, car rental insurance, card and cash emergency replacement, and so on.
You will also want to keep in mind that these cards typically have high annual fees. There are rewards cards that offer great deals, however you will want to make sure these outweigh the higher fees you will pay each year. Interest rates are higher for these cards, just as they are with cash back cards. Therefore, borrowers will want to make sure they can pay off the balance each month, so these charges will not be too costly for them and for your debt repayment plan.
Overall . . .
There are many different rewards cards on the market, as these cards are becoming more popular. This is a good thing. This means you have choice and can make sure you are selecting the correct card agreement for your financial needs. In addition to choosing which among the rewards or cash back cards is more suitable for you, you can decide if these cards make sense for you. Will you benefit from the rewards? Will the higher fees outweigh the points accumulation? Can you pay off your balance in full each month?
These are just a few of the questions you can ask yourself to determine whether the cash back or the rewards cards or either of them, will help you lower your debt and improve your credit. If you can save some money on travel or other purchases, if you can earn some extra money to pay down your debt, then perhaps all signs point to yes. If not, or if you’re not sure you should examine your options in further detail and make the most informed decision you can. All in all, your finances in 2015 will thank you for doing the proper research and choosing the most effective credit card option for managing your debt and your credit and this way you can stay on the right track for the remainder of the year and further into the future.