PGCFCU Blog

Using a credit card to pay for everyday purchases is convenient, but is it smart? Consumers often find it easier to use a credit card over a debit card when booking a hotel reservation, renting a car, and even paying for a restaurant meal. The absence of debit card account holds and spending limits tied to your checking account balance makes using a credit card more appealing.

To earn your loyalty, major credit card companies compete for your business by offering additional perks, exclusive discounts, and lower interest rates in the form of rewards credit cards. But, is a rewards credit card better than a debit or regular credit card? Understanding what rewards credit cards can offer might help you decide if they are a smart move for your financial situation.

Types of Rewards Credit Cards

One of the most attractive features of rewards credit cards is the ability to save money while spending money. This most commonly occurs as a result of purchases made over time. The way to save money with a rewards credit card will depend on the type of card you use. Usually, the credit card issuer rewards the user with points that can be redeemed once a certain threshold is reached. For example:

Cashback cards allow users to earn cash rewards. Details vary by the credit card issuer, but many offer an annual cash rebate based on a percentage charged on the card during the prior year.

Travel rewards credit cards award users points or miles based on the purchase of airline flights, hotel stays and even car rentals. Some cards grant users miles for every purchase, which can then be redeemed for airline flights.

Points based credit cards provide a way for users to collect points which can then redeem for select merchandise, gift cards, statement credits or cash back.

Some credit card issuers may combine elements from each of the reward types into one card. These perks are typically available over the life of the account with bonus earning opportunities during the first few months of use.

Are Rewards Credit Cards a Good Idea?

Since some rewards credit cards come with annual fees and interest rates higher than standard credit cards, users should examine their financial situation to determine if the benefits of a rewards credit card outweighs the costs.

Probably a Good Idea If:

• You can pay your account balance in full each month
• You have a good credit score
• You follow a monthly spending budget
• You travel often

Probably Not a Good Idea If:

You carry significant credit card balances. Doing so with a rewards card can negate the benefit of using the card. For example, a user who holds a rewards card with an annual fee of $100 and carries a balance of $5,000 each month at 18% interest will have a difficult time seeing the benefit of holding such a card.

How to Qualify for a Rewards Credit Card

Just like other lines of credit, the potential creditor will check your credit history and obtain information about your household income and employment history to determine whether to approve you for a credit card. Know your credit score before you apply for a rewards credit card to ensure that a poor credit score won’t result in a credit denial.

Choosing a Rewards Credit Card

With so many credit card offers to choose from, it's tough to decide which card is the best match. Keep it simple and select a rewards credit card that offers perks that match your lifestyle. A rewards card that offers points on items you purchase every day is a great place to start.

Prince George’s Community offers a rewards card with no annual fee and a low fixed interest rate. Earn $1 for every dollar you spend with the Elite Visa Rewards Credit Card.  Earned rewards can be redeemed for gift cards, merchandise and cash back. Apply now and enjoy the perks of a rewards-based credit card.