What are the different types of credit cards Rewards?
Credit cards rewards can be categorized based on the nature or type of features they offer to customers. Many cards also offer multiple features which in fact can make them belong to more than one category. The main rewards categories are as below:
Cash Back Credit Cards:
Cash back credit cards are credit cards that offer the user a benefit of earning back a percentage of his or her spend on the card through a direct cash back credit. For example, if a card offers you cashback of 5% on all supermarket spends and you use this card in a supermarket for AED 1,000 in a particular month, the bank will give you a credit of AED 50 (5% of AED 1,000) in your next credit card statement. This means that you have effectively saved AED 50 and your supermarket spend only actually cost you AED 950. Cash back credit cards can be very useful in helping you maximize your savings by simply using your credit card.
You must always be aware of the specific conditions associated with the particular cash back credit card. Almost all cash back credit cards have very specific conditions on what type of purchases allow you to earn cash back credits. These could be based on categories such as grocery or supermarket purchases, fuel purchases, retail purchase, dining and restaurant purchases and so on. In addition to the specific category of spend almost all cash back credit cards will have limits on how much cash back you can actually earn. This could be based on a maximum spend per category type, for example, cash back credit on grocery purchases could be capped at grocery spends of AED 3,000 per month. In such a scenario, if the cash back percentage was 5% then the maximum amount you can save each month on grocery spends would be AED 150 (5% of AED 3,000).
Certain banks could also set minimum spend requirements to be eligible to earn cash back credits. Usually, this is based on wither minimum spends on a specific category of purchases or on the overall total spend on the credit card for the month. For example, a bank could specify that cash back credits can be earned if a minimum spend of AED 1,000 is reached during the month.
The form of cash back given to you can also vary. Some credits will offer you direct statement credits for the value of cash back earned. These can then be considered as good as a cash payment. Some cash back cards offer gift vouchers at specific stores or malls for the value of cash back earned. Some banks may also require customers to contact them to redeem cash back miles while others may simply credit the cash back earned to customers without any request having to be placed.
As you can see, there are a lot of aspects to keep in mind in trying to ascertain the most suitable cash back credit card for you. Having a sound understanding of the cash back rules of any particular credit card and also your specific spend patterns will help you make an informed decision on which cash back credit card to choose. However, since there are more than 200 credit cards in the UAE market and a lot of them offering some form of cash back, it is almost impossible for a lay person to understand which card is most suitable to them. This is why a cash back simulator as provided by SoulWallet can be invaluable in saving you the trouble of hours of research in identifying the right credit card for you.
Rewards Credit Cards:
The majority of credit cards available offer some form of rewards to their customers based on the amount and type of spend on the card. Rewards can broadly be classified into Air Miles and points.
Air Miles refer to points earned that you can redeem for airline tickets. Air Miles earned are most commonly associated with a specific Airline’s frequent flyer program. The amount of air miles that can be earned depend on the particular credit card’s characteristics and the number of miles that can be redeemed for airline tickets would of course depend on the particular airline’s frequent flyer program. Given this, the true value of the Air Miles that you can earn on your credit card spends depends not only on the card’s Air Miles program but also the airline’s frequent flyer program and hence can vary over different points in time.
Point rewards are also earned based on spend and can be redeemed against vouchers at specific retailers, malls and so on. Some reward programs offer rewards on only certain categories of spend while some may offer rewards on all purchases made with the card. Some may also exclude specific categories from earning rewards. Some banks in the UAE exclude utility payments (electricity, water bills etc.) from their reward programs. Many reward programs are also tiered based on spend patterns across specific categories (grocery, school fees, fuel etc.) and specific levels of spend (for example between AED 1,000 to 5,000, AED 5,000 to10,000, AED 10,000+ and so on).
Both air miles and points rewards schemes can offer significant benefits to card holders but similar to cash back cards there can a lot of conditions that need to be understood fully to maximize the benefits earned.
One type of reward program is not suitable for every customer, and determining which one is most suitable for you requires a good understanding of the reward program characteristics as well as your likely spend amounts across various spend categories.
A point to note is that typically credit cards that provide some type of rewards program usually have annual fees associated with them. However, if one uses the card is a manner such that no interest charges are incurred then the value of the rewards earned will almost always be significantly higher than the annual fee cost.
