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Introducing the Credit Card

How do rewards programs work?

Rewards, rewards, rewards. They sound so enticing from afar. Many credit card companies will try to lure in applicants with rewards programs because that gives them more of a reason to use their cards. You may find great success with these rewards, but you cannot be fooled by them. In many cases, they aren’t all they’re made out to be.

Different Types of Rewards

Some cards offer one specific kind of reward, and others offer a variety of rewards throughout the year. Common reward offers include:

  • Cash Back: This is money that you get back after buying certain things on your card. It will usually be 1-5% of the purchase price, and it can be used on new purchases once you pay off your balance.
  • Gas Rewards: These will give you money back for purchases you make at a gas station.
  • Air Miles: These are usually tracked as points that you can cash in for airline tickets in the future. Each ticket will hold a certain point value (usually in the hundreds), so you have to rack up a lot of them to be able to get a free plane ticket.
  • Travel Rewards: These are similar to air miles, but they cover hotel fees, cruises, and more. You might be able to use your points on package deals through your credit card company, or you could cash them in for a specific hotel, rental car, airplane, etc.

In addition to these rewards, some cards offer discounts for travel accommodations, online purchases, and more. Simply put, you could save money on the things you need most just by paying with your credit card. Of course, you will have to make sure the card’s carrying costs do not exceed its rewards. If you manage your money correctly though, a rewards program may work in your favor.

Calculating Rewards

Since every card’s rewards program is a little different, it is hard to set up a definitive formula to help you calculate the rewards you can get. Instead of doing that, we’ll show you what the rewards might look like on the Capital One Cash Rewards card.

Capital One Cash Rewards Card Features

  • 1% cash back on all purchases
  • 50% bonus on the cash back you earn every year
  • 0% intro APR for the first year (the time frame will vary)
  • 19.8% APR after the intro period
  • $39 annual fee

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