How Credit Card Incentive Programs Work
With the popularity of credit cards today, it's no wonder that
there are a variety of incentive programs offered by different
card companies in an effort to get consumers to choose one
company's cards over another. Some incentive programs offer you
cash back on your purchases, while others offer free airline
miles or discounts on certain items or from certain retailers...
but incentive programs don't do much good if consumers aren't
sure how to use them or whether one program is better for their
needs than another.
Below you'll find an overview of what incentive programs are and
how they operate, as well as examples of some of the more common
benefits offered by these programs and some of the advantages of
each.
What Incentive Programs Are Put simply, incentive programs that
are offered by credit card companies are just marketing tools
used to try and get people to choose particular cards. They are
often combined with lower introductory rates in an effort to
draw in more customers, and are usually dependant upon the
cardholder's ability to keep their card account up to date and
their payments current.
Cash Back Programs
One of the earlier incentive programs that were used by credit
card companies was the cash back incentive... it is also one of
the more popular programs. Cash back incentive programs work by
giving cardholders a portion of the amount that they pay on each
purchase back, usually once per year. The percentage of each
purchase is generally quite low (around 1%, though sometimes as
high as 1.5% or 2%), but over the course of a year that small
percentage can begin to add up. Some cards completely forego the
annual payment, though... they instead pay their percentage back
as soon as each purchase clears the processor.
Airline Miles Programs
Another of the early incentive programs, cards that award
airline miles or frequent flyer miles with major airlines have
always been popular... especially with businessmen or others who
travel by plane on a semi-regular basis. Some cards only allow
trips to be booked at certain times or on certain dates, though
a growing trend is to allow customers to use their built-up
airline miles whenever they wish. This can be especially useful
for individuals who take regular vacations... the purchases that
they make throughout the year can be utilized the following year
to pay for vacation travel.
Discount Programs
As more retailers and major manufacturers have become aligned
with different credit card companies, a number of cards that
offer discounts with certain retailers or with certain types of
products have flooded the market. Automotive manufacturers may
offer one type of card that entitles cardholders to a discount
on that make of vehicle, whereas chains of department stores
might have another card that gives customers a discount on all
of the items that they purchase. Discount cards remain one of
the more popular incentive cards on the market, and are often
used for purchases with the retailers who are partnered with
their issuers.
Other Programs
In addition to these common incentive programs, there are a
variety of other incentive programs that various credit card
issuers might offer. Some of these have a mass appeal, such as
automotive roadside assistance, whereas others might have a more
limited appeal such as making donations to specific charities.
The benefits of the various incentives should be carefully
weighed before deciding on one particular program, as well as
the usefulness and the likelihood that it will fit in with the
way that you usually shop with your credit cards.
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