Rewards credit cards offer a number of benefits, but the main one is bonus points. They can be exchanged for merchandise, gift certificates, statement credits, and other perks. Customers can use the card to pay for groceries, dining, travel, entertainment, and more. Companies and large institutions such as the Royal Bank of Canada and Canadian Imperial Bank of Commerce offer such products.
Features to Consider
Issuers offer different products but generally, these cards are suitable for borrowers who pay their balance in full. Factors to consider include fees and costs, benefits and perks, and value per dollar spent. Some issuers offer hotel points while others feature airline miles. The type of product to choose depends on whether you are a frequent traveler or prefer to exchange points for merchandise. As a rule, between one and two points per dollar is considered acceptable. Cards that offer excellent programs usually go with an annual fee and higher interest rate compared to other products. This is why, it is very important to pay the balance in full or fees and interest charges may offset the rewards earned. Rewards cards are designed for regular use or otherwise holders don’t earn enough points. There is a sign-up bonus or complementary points to encourage spending. Other factors to consider include additional perks and benefits.
The types of perks offered vary from issuer to issuer. Some companies feature guaranteed hotel reservations and concierge services while others offer insurance and protection policies. Some perks are offered free-of-charge and others are optional. Rewards cards feature different insurance covers, including auto rental collision insurance, travel accident insurance, and zero liability. Some products offer 10,000 or 15,000 welcome points on signing up. Customers who travel frequently by car can choose a program offering bonus points toward free gas. Some issuers even feature exclusive access to sporting and family events, concert tickets, Broadway shows, and others. The card can be synced with the customer’s Twitter or Facebook account to find discounts on entertainment, grocery shopping, fine dining, and more.
Customers can use their cards to get free discounts at retailers such as Home Depot, Gap, Apple, and others. Participating retailers include stores, outlets, and shopping malls, including Wal-Mart, Sierra, and Barnes and Noble.
Who Can Apply for a Card?
Some rewards cards are offered to college and university students and go with a low annual fee. Others are geared toward frequent shoppers and allow them to earn premium awards. Some issuers have minimum income requirements. For example, customers qualify for RBC’s Visa Infinite Avion if they have an annual personal income of $60,000 or higher. Customers enjoy the fact that there are no restrictions or blackouts, and points can be used on any airline. Travel-related purchases such as hotel bookings and rental cars earn more points. Other products don’t have minimum income requirements. Customers from any income bracket can apply for the Visa Platinum Avion. Holders benefit from the fact that points don’t expire.
Most cards that offer attractive rewards are reserved for applicants with an excellent credit score and payment history, high income, and stable job. Borrowers with poor credit and self-employed individuals may have to apply for a secured card or another type of product.
Types of Products to Choose From
Credit cards are advertised on company websites, in newspapers, on TV, and stuffed into mailboxes. Applicants can choose from different products with attractive rewards programs, including the True Earnings Card from Costco and American Express and American Express Aeroplan Plus Platinum Card.
Picking the right card is a challenge considering the wide array of products available. In general, there are 4 types of products to choose from, airmiles, gas, awards, and balance transfer cards. Balance transfer cards with rewards points are offered to borrowers with multiple, high-interest debts. Borrowers who owe $10,000 or more often seek ways to reduce their interest charges. This card is not a good option for people who have no or little debt. In addition, issuers offer personal and business rewards cards. The latter usually feature higher spending limits and more perks and benefits. Customers can order employee cards free of charge.
When Rewards End Up Costing a Lot
This usually happens when borrowers pay only the minimum and charge non-essential items such as dining out, books, concert tickets, grocery shopping, etc. Holders are tempted to charge more items to the card in order to collect more points. The problem is that many people have poor budgeting and money management habits and make late payments. They buy things that they don’t need. For example, they don’t need a pair of shoes valued at $400, and they can’t afford it. They buy it because they can earn 500 rewards points. In such cases, customers end up spending more in fees and interest charges than the value of the airmiles or bonus points earned. Bonus points are usually worth between 1 and 2 percent of the money spent. If a borrower spends $12,000 a year, he will earn between $1,200 and $2,400 worth of bonus points. There are cases in which rewards points are worth it. This holds true for business travel. Someone else, i.e. your company is paying your travel and business-related expenses. In fact, the first rewards schemes were developed to help airlines to attract business travelers.
Other Ways to Get Rewards
Rewards cards are not the only option to get discounts and free merchandise. Many employers offer perks such as free food, discounts on attractions and concert tickets, reimbursement of transit and transport costs, and even free massages. Retailers also advertise membership and discounts. Costco, for example, offers discounts on car tires, travel, mortgage loans, and pharmacy drugs. You can choose from consumer and business services, as well as a wide array of insurance products.
If you prefer shopping on credit, make sure that your card doesn’t come with hefty penalties and foreign exchange transaction fees. With some products, you are given the opportunity to earn up to 50,000 bonus points during the first 3 months. You will get $500 in cash back or more than $600 toward tickets and travel-related expenses. Moreover, some issuers offer products with rewards programs and no annual fee during the first year. Thus, you will save money on maintenance fees. Check whether points expire and if there is a limit on the number of points you can earn. Look for a card that features no expiry dates.
Top 6 Rewards Credit Cards
Scotia Momentum® VISA* Infinite card
Scotia’s VISA goes with a great promo rate of 1.99 percent, and the $99 annual fee is waived during the first year. The intro rate is offered on checks, transfers, and advances. This is a great rewards card with cash incentives of up to 4 percent on store and gas purchases. Clients benefit from shopping convenience and payment flexibility with add-ons such as Visa payWave.
- Annual fee: $99
- Supplementary cards: $30
- Purchase rate: 19.99 percent
- Min credit limit: $5,000
Scotiabank® Rewards VISA* Card
Yet another offer by Scotiabank, this rewards card goes with travel incentives and everyday benefits, a flexible points redemption schedule, and the option to redeem points for products, gift cards, investment dollars, and more. Travel benefits such as discounts on vacation packages and hotel bookings also apply. There is one bonus point for each $2 in purchases, and customers enjoy perks and upgrades on cruise packages.
- Purchase rate: 19.99 percent
- Cash advance rate: 21.99 percent
- No annual fee
- Minimum limit: $500
ScotiaHockey™ NHL® VISA* card
This VISA card features hockey rewards points and special discounts on NHL purchases. Scotiabank offers an attractive rewards program whereby holders earn 1 point for each $1 they spend in purchases. Points can be exchanged for an array of products, including game thickets and NHL store merchandise. Credit checks and car rental and merchandise discounts are offered as well as optional card insurance coverage.
- Annual fee: $29
- Supplementary cards: $15
- Purchase rate: 19.99 percent
- Interest free period: 21 days
American Express® Gold Rewards Card
This is a charge card with a rewards program that features a welcome bonus of 25,000 bonus points and allows holders to earn extra points on select everyday and travel purchases. One supplementary card is offered at no added cost. The points earned can be transferred to different programs, including frequent flyer programs. Double points are offered on purchases such as cruises, rentals, and other travel purchases.
- Annual fee: $150
- First-year annual fee waiver
- Rate on delinquent charges: 30 percent
Canadian Tire Options MasterCard®
This card offers a quick way to earn rewards points and major savings at gas bars and Canadian Tire stores. Attractive flyer bonuses are also offered as well as extra points on Canadian Tire Home services. In addition to these incentives, this MasterCard also goes with added benefits such as easy returns, quick online checkout options, a convenient mobile app, and access to attractive financing programs.
- Interest rate: 19.99 percent
- Grace period: 21 days
- Annual fee: none
HSBC’s MasterCard offers the option to personalize rewards and choose between two options – the Cash Back Rewards Program and the Personal Rewards Program. Customers earn 1 percent cash back or 1 point on each dollar in purchases, depending on the program of choice. There is a low-rate option for further savings, and the card also features optional medical and travel insurance. Customers also benefit from a long grace period of up to 23 days on new purchases.
- Purchase rate: 19.9 percent
- No annual fee
- Purchase rate: 12.9
- Annual fee: $25