All You Need To Know About Credit Card Reward Points
BENGALURU: Nowadays, it seems like rewards for credit cards are offered by just about every major bank and Credit Card Company. Reward points are a way to encourage customers to stay loyal to the brand or store by offering some benefits which they collect as a result of shopping at a particular brand outlet, according to rediff.com.
These are some of the pros and cons:-
Quick Way To Borrow:
If you need to buy something expensive that you can’t afford to pay for all at once, a credit card is ideal. If you don’t have the cash to hand or even in your bank account you can pay with a credit card and then spread the cost over a number of months. Credit cards are also an easy and secure way to pay for internet shopping. Plus, they are widely accepted around the world.
Consumer Protection:
You get more protection if you pay with a credit card than if you pay with a debit card, cash or cheque. If the company goes bust, or your purchase is faulty or doesn’t turn up, you won’t lose out because you can claim the money back from your credit card provider. You will also have protection if your card is used fraudulently as your card provider should refund the money.
You won’t get a refund though if your card provider finds that you were negligent so make sure you don’t write down your PIN number anywhere.
Borrow For Free:
Some credit cards offer 0 pct periods meaning you can effectively benefit from an interest-free loan. You need to clear your balance before the 0 pct offer ends though otherwise you will be charged interest. The average interest rate is 18 pct that’s quite high which is why you should pay your debt off before interest kicks in. Not everyone needs an extended interest-free period, but even if you pay your credit card bill in full each month, you will still ‘borrow for free’.
You usually get up to 59 days before your credit card bill needs paying and as long as you pay it in its entirety you won’t be charged interest. This can be a great help in managing your cash flow.
Switch Your Balance:
If you owe money on credit or store cards, taking out a new card could actually be a good option. You'll probably be paying interest rates of at least 18 pct, but you could cut that to zero by transferring your debt onto a 0 pct balance transfer card. There will be a transfer fee to pay of around 3 pct, but it's worth it as it will still be less than the interest you'll be charged if you stick with your existing card.
Beware Of Debt Trap:
It’s important to remember that a credit card is a form of borrowing. You buy now and pay later - and there are risks. If you don't pay off your balance in full each month, you will start to rack up interest at a relatively high rate. Your debt can therefore quickly spiral out of control, particularly if you pay off only the minimum monthly amount.
You should therefore always try to pay more than the monthly minimum and you should think of your credit card only as a short-term borrowing facility.
Hidden Costs:
The interest rate is not the only cost of a credit card. A fee will be charged if you are late making your monthly payment, or miss it altogether. You'll also pay a penalty if you exceed your credit limit. So make sure you keep track of your spending and always pay your bill on time. And don't be tempted to withdraw cash on your credit card.
Most card firms charge a fee to withdraw cash from an ATM, typically about 2 pct. You will also start to rack up interest immediately as there is no interest-free period on cash withdrawals.
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