Cash Back or Rewards Points: Which Do You Value Most?
Holiday shopping can be stressful, but earning rewards on your purchases can make it worthwhile. Learn how to do it right!
With Thanksgiving just around the corner, many of us have begun our holiday shopping. Finding and paying for the perfect gifts for our loved ones can be exhausting and stressful, so why not earn rewards on the sought-after purchases you are making!
You earn rewards by spending money. The more you spend, the more gift cards, cash back or experiences you earn.
There’s no shortage of rewards credit card offers out there, which can make it hard to choose the best one. It’s important to do your research on which card lines up with the features you value most and is the right fit for your spending habits.
Do you want to earn cash back or reward points?
Mountain America Credit Union offers two types of rewards credit cards: a Cash Back credit card and a Rewards credit card. See which type of card you may prefer more by taking the quiz below.
Answer these three questions to find your ideal card
Cash back credit cards
When using a cash back credit card, you earn back a percentage of the money you spend on eligible purchases. A cash bonus can typically be redeemed for statement credits or deposited directly into your bank account.
While some cash back cards may reward you with a set percentage cash back for all purchases you may make, others have a tiered rewards program. For example, you may get 3% cash back at restaurants, 2% at gas stations and grocery stores, and then 1% everywhere else.
Rewards credit cardsWith a rewards credit card, you earn points with every purchase—from groceries to fuel, and entertainment to utilities. Points can be redeemed for travel rebates, gift cards, event tickets and other experiences—it’s your choice. Different card issuers may offer different earning opportunities. One card may give you one rewards point for every dollar you spend while another may give you two—maybe more if you purchase in a certain category.
Weigh the risks vs. rewardsStudies show that when paying with a credit card, consumers tend to spend substantially more than when paying with cash. Knowing our tendency to overspend, it is important to choose a rewards credit card strategically by following these tips.
Before obtaining a credit card, chart your spending over three to six months and break out your expenses and purchases into categories. Then, after using your credit card for the same amount of time, compare your spending with your spending before you got the card. If you see discrepancies—especially large ones—consider using cash for similar purchases in the future or adjust your spending to eliminate the gaps.
2. Compare the fees.Credit card companies often charge for different behaviors or just for the privilege of using the card. Look out for fees like:
- Annual fees—This is a fee for using the card and it can vary greatly depending on the card issuer. Some companies don’t charge annual fees.
- Late fees—If you don’t make a minimum payment on time every month, you may receive a late payment charge.
- Interest fees—You face interest fees if you don’t pay your statement balance off every month. If you tend to charge more than you can afford, or aren’t able to pay your balance in full, you’ll be responsible for the statement balance as well as the added interest costs.
- Cash advance fee—If you take out cash against your credit card balance, you could pay a cash advance fee, like 3% to 5% of the amount accessed. Cash advances may also get hit with a higher interest rate compared with your card’s interest rate on purchases.
- Balance transfer fee—If you’re moving a credit card balance over from one card to another, some issuers will charge you a balance transfer fee.
Some credit cards offer bonus earnings for a specific amount of time, usually right after opening the account. For example, you might earn 6% back at restaurants for the first three months of your account opening, then 3% after that. Make sure you track when a bonus period ends and modify your spending patterns.
4. Don’t fall prey to the game.Most rewards credit cards are set up to feel like a game. It is enticing to unlock bonuses and earn points through spending, which can later be redeemed for even greater rewards. Remember your goal is to seek offers that will generate the largest return for your current spending habits—it's not to capitalize on every issuer’s promotion.
Make your holiday shopping rewarding for you too, not just your loved ones! Apply now for your Mountain America Cash Back or Rewards credit card. You may also apply at your nearest Mountain America branch or over the phone at 1-800-748-4302.
