Rebate Credit Cards vs. Rewards Credit Cards

After considering the pros and cons of different types of cards individually, the next step in your considerations may be to compare several different offers. This article helps you examine the rebate or cash back card and rewards cards in reference to each other. If you are trying to decide between a rebate card on the one hand and another type of reward card on the other hand, this article will help you focus on what might make one or the other a better choice for you.

Rebate and Rewards Cards

Although technically a rebate or cash back card is a type of rewards cards, it differs from all other types of reward cards in that your payment to the credit card issuer is refunded in kind, rather than through any other type of reward. Other reward cards, on the other hand, may offer you points, miles, specific merchandise, playtime on World of Warcraft, gift certificates, and more. Because of this, many people consider them as alternatives, rather than as different versions of the same type of card.

Card Fees

Both rebate and reward credit cards are available with no annual card fee, and this is a card feature you should look for in any case. The reason for this is that an annual fee would diminish the value of the reward or rebate to the extent that it might not be worth your while to have such a card.

Keeping Track

Reward cards take a great deal more tracking from the card holder to make them worthwhile. Because points and miles can expire (whereas cash doesn’t), if rewards are not used in time, the value may be forfeited if the card holder is not intent on monitoring the situation. In addition, account inactivity or late payments can also lead to a forfeiture of rewards, so the whole account needs to be carefully managed. You may also have to submit a request in order to redeem points when you qualify for redemption.

Caps

On the rebate side, a cap on earnings for the year may keep the value of the cash you can earn back at a lower level than what you could earn with the same purchases applied on a different type of rewards card.

Minimum Requirements

The requirements on rebate cards to reach a higher tier can create pressure to make more purchases or make them sooner than you would otherwise. Without balance, this can lead to problematic financial decisions. On the other hand, rewards cards can increments so that you have to get to the next designated increment of points or miles you need for redemption, which can have the same effect—that of prompting otherwise unplanned and unnecessary spending.

Choices

Another issue with rewards other than cash is what rewards are offered at the level you have reached. If the items hold no interest for you, then the card is not very valuable (or worth your time to track all its activity). With cash, you don’t have this problem: once the cash is in your hands, you can use it to buy a popcorn maker, a harmonica, a golf lesson, a textbook for your nursing course, or a ticket to Manila without anyone’s interference.

Exclusions

Both rebate cards and other reward cards generally have at least some exclusions on what will count towards your cash back or reward. In both cases, it’s likely that a cash advance or a balance transfer will not be credited (but there may be exceptions where balance transfers are concerned). In addition, purchases from certain stores or certain types of stores may be excluded from helping you accrue your cash back or other reward.

Redemption Fees

With travel rewards, you may run into another downside to rewards cards: the need to pay to redeem your accumulated miles. In addition, there may be hefty penalties for turning in miles too close to the travel date, for deciding not to use the ticket, or for involving an airline representative in your booking.

Bang for Your Buck

That all being said, most calculations have rewards other than cash giving you more value for your money in terms of pure dollar amounts. That is, you can receive more value back with reward cards than you can with cash back cards given the current rates in summer, 2008. This is, of course, predicated on the assumption that the rewards card offers something that you want . . .

Who Says You Can’t Have It All?

And that being said, there may be a better way. The Citi Card Thank You Rewards Network does not separate out cash from other rewards as many cards to, but allows you to choose a variety of ways to redeem your points: a rebate check, a statement credit, airline travel, or merchandise. The network includes VISA, MasterCard, and American Express cars. The offer that I can see today as I write this article may not be there when you check, but knowing that such a card has existed, maybe it will be a type that you will wish to hunt for.