Here is How You Can Pick a Suitable Rewards Credit Card
A credit card, which rewards you whenever you use it- could there be anything better? When used properly, your rewards card could prove to be your ticket to a stream of passive earnings and benefits, which can be enjoyed by making purchases regularly.
The reward credit card offers in UAE can be in the form of hotel or airline points, cashback, general points for spending, and other perks. Some also include spending portals, which allow you to earn additional points on making online purchases.
Different Types of Reward Cards
If you are able to meet all the eligibility criteria for obtaining a rewards card, the next thing you must do is determining your objectives.
Do you wish to earn some extra money by the month-end? Or do you wish to collect points for a dream vacation? Or maximizing your miles with a particular airline is your goal? Your answer to these questions will help you in choosing the type of card that will work the best for you.
Here are the different categories of this type of credit card.
Cashback Card with Bonus Categories
A few cards have standard rates for some specific categories while there are also some cards that offer rotating categories, which may vary quarterly.
These categories may include groceries, gas, restaurants, and more specific opportunities for spending such as online shopping websites, wholesale stores, and movie theatres.
Flat Rate Cashback Cards
In case keeping a record of bonus categories feel like a chore to you, a flat-rate cash back card can let you earn a decent amount back on every purchase, irrespective of the spending category.
General Travel-related Credit Cards with Flexible Options for Redemption
This card is amongst the low-maintenance methods of earning reward points for airline tickets and hotels by making your regular transactions.
Such cards let you spend the reward points you have earned at various hotel chains or airlines, unlike the co-branded card.
Also, most of the travel cards offer a portal for spending, which lets you book your trip using the points at some special rate.
Co-Branded Credit Cards
In case you have a preferred hotel chain or airline, a co-branded card can help you in getting to your next trip more quickly by earning you the room and flight points.
Considerations for Obtaining the Card
After discussing the various kinds of reward cards available in the market, let us now see some general considerations that you must remember while choosing rewards cards in the UAE.
The annual fee charged on a credit card can sometimes go up to hundreds of dirhams, hence, it is important to ensure that you earn a number of rewards on your card so as to offset them.
Card Acceptance and Foreign Transaction Charges
A few of these cards may levy fees for the transactions done internationally. Also, based on the payment network of your credit card, you can end up encountering card acceptance out of the UAE with a limit.
Various cards provide unique perks such as airport lounge access or special events that can help in sweetening the deal for you.
Now, another important question that may arise in your minds is:
Whether a Rewards Credit is Suitable for you or not?
If you meet all of at least some of the following eligibility criteria, you can wish to apply for this card.
Having a Good to Excellent Credit
Maximum of the rewards cards need at least a good credit rating; however, there can be some exceptions.
Generally, Do Not Carry Balance
These cards usually come with higher APR. Hence, if you are carrying a balance, the interest accumulated will mostly cancel out your rewards value.
In case you are a travel junkie, you can make use of your daily spending for building points for your next vacation, especially if you own a travel card.
Loyalty to a Specific Hotel or Airline
When considering travel rewards, a co-branded card is capable of helping you in racking up points more quickly for the flights and lodges you prefer.
Spending Too Much on Particular Categories
Some of these cards offer extra rewards on common categories of spending such as groceries, gas, and restaurants. Sometimes you can even enjoy up to six percent cash back.
Before you begin applying for this card, finding the answers to the following questions can be a good idea.
How are the Rewards Added-Up?
You need to consider the number of points you earn against every dirham and the amount required for getting a reward. Check carefully to have an idea of the number of points you can earn every year and when do these points expire.
How Simple is it to Earn the Reward?
A lot of cash reward programs offer you reward automatically as soon as you have made enough spending in order to qualify. In the case of others, you have the option of redeeming the rewards online or through phone whenever you want. Checking how user-friendly the website of a card company is before applying can be a good idea.
Is there any Catch?
The rewards cards can charge an annual fee or come with a higher rate of interest as compared to other cards. You may also have to pay a fee for redeeming the points. However, a good program can be worth the additional cost, but ensure that you are well aware of the details upfront.
What to do with Late Payments?
Missed or late payments can have an impact on your ability of redeeming or earning points or removing the rewards balance entirely. Some of the banks charge a fee for reinstating reward points when you have made a late payment after a few days.
Proceeding with Caution
Before anything else, let us make this clear: In case you already have a revolving balance on your credit card, or you are not sure if you will be able to pay off the total amount every month, this kind of credit card is not a suitable option for you.
Banks are not charitable naturally. When they offer you something without any charge, no matter it is redeemable points, cash back, or a zero percent APR as introductory bonus, they essentially make a bet. This bet is all about you generating more income in their favor than what they are spending on you.
To avoid becoming the “dream customer” for the bank, the only way is to make payment of your statement balance in full every month. Otherwise, you become subject to high rates of interest and late payment charges that will outweigh the benefits you receive.
Caveats aside, there are many people who benefit from making use of these cards properly.
In a Nutshell!
Before applying for a card, checking on your credit history can be a good idea. Some of the best cards in this category may need an above-average credit rating. In case you feel that you need to work on improving your credit rating, the best thing possible is paying bills for the current credit cards well in time.
Whenever you decide on applying, make sure to keep in mind a few important things:
This type of card can assist you in earning benefits or rewards, by shopping regularly. Although spending more will lead to earning more rewards, accumulating a huge balance only for rewards might not be the best alternative. Using your card frequently is fine, but ensure that you spend only the amount that you can afford paying back.
Make sure you pay off balances so that the interests do not begin to eat away the rewards. Out of the various credit card offers in UAE, select the one that is right for your lifestyle.