What are reward points on a credit card?

Question

Not the kind you get on rewards cards from stores, the kind you get on credit cards. How do you get them? What do you do with them once you've got them, and how? What does the bank get out of it? Are they worth it?

ALSO: Can you get them on debit cards instead of credit cards?

Daniel · Accepted Answer

Reward points are points you get for every dollar you spend on a credit card (that offers rewards of course). How many points depends on the type of card or the category of spending. You can redeem them for things like gift cards, airline miles, and cash back. To redeem them you can do it online or you can call the company. Yes, they're worth it, especially if you pay your balance in full every month because it's like making money from buying things you have to buy anyway. What banks get out of it is more customers who want a rewards card and therefore increased likelihood that more people will carry a balance and they can make money off the interest.

I'm not entirely sure about debit cards. My friend says he has a cash back checking account with his bank that he makes money from whenever he spends from it (not sure how much he gets back). My credit union doesn't offer anything like that though so I don't much about it.

Silly Goose · Answer

Credit cards only.
Example:  A credit card that offers 1% cash back.
This means that for every $100 you spend, $1 gets put back as a credit to your account.
Very simple.   Don't make it complicated.
Worth it?  Only if you pay off fully every month.
Capital One Quicksilver is an example in case you want to do some reading.
http://www.capitalone.com/rewards/
Never fall for airline or hotel points.

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What are reward points on a credit card?

2 Answers