Loyalty and rewards programs from credit card issuers and retailers are nothing new – in fact, one recent survey found that Americans average about 22 loyalty membership programs per household, ranging from grocery stores to your favorite lunch spot.
Still, the offers keep coming, encouraging all of us to turn our shopping habits into additional cash, discounted merchandise, or even free stuff. But how do you know if rewards programs are worth your while?
A two-way street
Who doesn’t love perks? Credit card companies realize the broad appeal too – that’s why they offer you cards that can get you cash back or rewards for spending on things you buy every day like your groceries.
What’s in it for them? Two things: repeat business and data. Companies are trying to grab more of your spending by offering you incentives. In addition, the information that companies collect on you – your age, address, and purchasing history – can be valuable for marketing purposes.
Different rewards for different people
Not all rewards programs make sense for everyone. It’s a good idea to consider each rewards program’s formulas, fees, and restrictions as well as how the program fits your own spending habits.
Cash-back credit cards are a common and simple option, since you can redeem rewards regularly and use the money to get the best deals on things you want to buy. Most cards offer 1 percent cash back for standard purchases. Sometimes you can even pay up for better rewards. For example, a credit card issuer might offer two versions of the same card: one that carries an annual fee but earns a higher rate of rewards, and a no-fee version that pays a lower rate.
Points cards allow you to convert points into cash rewards, airline rewards, or other merchandise. These often have you waiting a long time to earn enough points to redeem a reward.
On the other hand, some points cards will waive the annual fee in the first year, while other premium travel cards can offer additional benefits, such as travel insurance to cover canceled trips and rental-car insurance. If you travel a lot, those perks could make sense, even with an annual fee.
Finally, there are retailer cards that often earn you points that you can redeem for rewards with that specific retailer. Weigh the benefits of earning points and other perks that can only be used for the retailer versus more general cash-back and points cards that give you more redemption flexibility.
Some things to consider before applying for a rewards program
Always dig deep into the details and terms and conditions of any rewards program. It might be boring, but it can help you avoid getting surprised.
- You may have heard about a good credit card reward program from a friend – but don’t be surprised if you can’t get the same great deal. The most attractive rewards are often reserved for customers with the best credit scores. In many cases, a score in the mid-to-upper 700s may be needed to qualify for the best rewards program. It’s a good idea to first figure out whether you’ll likely to get approved for a credit card before you apply, otherwise your credit score could also be adversely impacted.
- Poor credit might also mean you can’t get a card’s first year annual fee waived – a benefit enjoyed by many consumers with good credit. If that’s the case, determine if the expected rewards you’ll get during the first (and subsequent years) are still worth having for you to consistently fork over that annual fee.
- Some cards even entice you with 5 percent cash back or 5x points in rotating seasonal categories – but you have to opt into the program every quarter – or you don’t get the higher earnings rate. To get the most out of these cards you’ll need to do your homework and know when to use a card that’s offering a bonus over a specific timeframe.
- Other rewards cards have spending limits or expiration dates on the rewards you earn.
- Be honest with yourself about how likely you’ll make your monthly payments on time. Some banks remove points and cash back if you miss a payment, or they may charge you to get them reinstated. Arranging to have your credit card bill automatically paid from your checking account could be an easy way to avoid losing your hard earned points and cash back.
- Finally, it’s never a good idea to run a credit card balance in order to earn rewards – you’ll never come out ahead in such a scenario because even the best rewards program won’t cover the 15% or more interest rate charged on revolving balances.
If you're looking for different credit cards with rewards, check out our credit card product page which includes reviews from other MoneyLion customers.
MoneyLion Rewards Program
At MoneyLion we give you points every time you demonstrate a good financial action that lead to achieving financial wellness. Broadly this means you can earn points in the following categories:
- Good Borrowing Habits (example: repaying a loan in full)
- Good Financial Habits (example: connecting a bank account to track to net worth)
- Good Credit Habits (example: enrolling for free credit monitoring)
- Help Your community (example: write a credit card product review)
- Connecting with Moneylion (example: verify your mobile number)
The points you earn can be used to redeem rewards, including hundreds of different gift cards from retailers like Amazon.com, Starbucks, iTunes, and more. The more points you rack up, the more perks and financial benefits you’ll unlock, including lower rates on future loans you get with MoneyLion.
To see how many points each good financial action can earn, go to the "Earn Points" section of the Rewards tab after signing into your MoneyLion account.
Anyone who signs up for a free MoneyLion account can earn points (i.e. you don’t need to get a loan from us in order to participate in our Rewards program). Get started earning points today by signing up.