Definition
A rewards card is a credit card that includes incentives for the borrower based on the amount and type of purchases made.
Analysis
A rewards card has every other component of a major credit card, with an added bonus. A rewards card may include perks designed to motivate the borrower to use the card for more transactions.
Some rewards cards pay cash to the borrower as a percentage of overall purchases. Sometimes the percentage is increased for certain types of transactions, such as at gas stations, grocery stores and drug stores. These tend to be some of the best rewards cards.
Another type of rewards card provides credits toward airline travel. A cardholder may accumulate miles that can be combined with miles they earn through airine frequent flier programs, such as Delta or American Airlines. Southwest Airlines offers a popular awards card that awards flight credits based on purchases, which can be combined with those earned through its Rapid Rewards program.
Some rewards cards offer points that may be redeemed for merchandise or gift cards. This tends to make it harder to compare competing offers, since it is difficult to quantify the value of points. Rewards cards that offer points tend offer more restrictive, less valuable perks.
Related Links
Bankrate.com is one of the leading online sites for comparing rewards cards.
