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Racking Up Credit Rewards

Additionally, companies can and will change their program terms at any time, and the vast majority of these changes are negative for the customer. For example, some companies may suddenly require more miles for an award than previously established without any advance notice.

Serious collectors of points refer to these changes as program devaluations, as it effectively reduces the value of the points they have already earned, kind of like runaway inflation. But you don’t have to employ fancy economic terms to appreciate that companies are just moving the goal posts in the middle of the game – because they can.

Anyone who earns reward points from a credit card, airline, or hotel needs to know the basics about how these programs work. But once you understand what points are worth, and how to earn them, you can make the best decision when it comes to earning credit card rewards.

Merchant Specific Rewards Programs

There are rewards programs that offer merchant-specific rewards. These programs offer you bonus rewards when you shop with certain merchants, while some also offer discounts on your purchases.

According to the 360 Degrees of Financial Literacy organization,

Merchant specific rewards programs are marketing tools that encourage brand-loyalty purchases by offering price discounts, bonus points, and/or coupons toward future purchases, donations to your favorite charity, and even cash rebates. The bank compiles information about your purchases and the rewards you've earned. It then stores information about you that's useful to the merchant when tailoring advertising that's pitched to your spending preferences.

While many rewards programs offer credit with -and rewards from- a particular merchant, other programs offered by credit card issuers may allow you to earn rewards, such as gift certificates, that may be used with a wide variety of merchants. In most cases, these cards offer the option of earning cash back each time you use the card. A cash back reward can be used anytime, anywhere.

The rules, restrictions and limitations on what you may earn through a rewards program can vary. Many programs may offer a larger reward for purchasing select products or categories of products than they do for all products. You may have to spend a minimum amount per month, quarter, or year to get any rewards, and there are often limits both on the amount of rewards you can earn and on the time allowed for cashing them in. It is important to check with your card issuer to understand what merchant-specific rewards are offered with your credit card.

In addition to the rewards cards mentioned above, there are special interest credit cards that offer rewards tailored specifically to businesses, the military, and charities, which we will review in the next chapter.