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Credit cards do have an interest rate. When you use other’s money to pay your bills and payments you must be paying a fee for it and this is called the interest rate. Though this cost is minor yes, it does have worth. Different cards have different credit spending limits and their fee of money credit cost also varies accordingly. These cards also have spending limits that you are supposed to be within.
These credit card loans must have some offers for their users. Like; they offer interest-free days, where you can spend money on your purchases and payments without paying hardly any interest fee. Moreover, there is a concept of bonus points where you can earn points and bonuses according to card packages. Whenever you spend some money by using the credit card, the bonuses are being added up into your account. Now the question is what these bonuses or rewards can get you up to?
The relationship between interest rates and rewards
Though choosing a credit card type totally depends upon your needs and preferences. Still, there is a noteworthy trade-off relationship between the interest rates of credit cards and their reward giving strategies. Because somewhere we all know we have been compensating for these rewards and offers in any other way, and this does happen. There are three main determinants of your choice and they play with each other to get maximum profit out of customers’ pockets. These three are interest rate of credit card, the annual lump sum amount of fee and the reward you get on spending a certain amount of money.
In UAE all cards offer an interest rate of 37% almost with an annual fee of 277 AED almost. Secondly, the cards with reward programs offer a rate of 38% with an annual amount of fee AED 457. Thirdly, cards with no reward program earn on an interest rate of 28% with an annual amount of fee of AED 221 that they charge. With these amounts and rates, one thing is obvious that there is a win-win situation in every card. And also this is evident that you cannot get anything without paying its cost.
Higher the balance, better the rate
Might the card, best will be the rates. If you are enjoying the high balance amount in your credit card then definitely there are air chances of having the best credit card rates. Here situations vary when you have a card with no reward program and card with a reward policy. One thing is obvious that if you are carrying a large amount of money balance in your credit card every month I there any point of these rewards for you? Obviously, No! Because any savings will cost you in the form of heavy interest rates and fat annual fee amounts and you will end up being at the same spending point.
Low balance and credit limit and high rewards
Reward options can be good to go choice for those who relatively spend less from their credit cards. Also, with low credit card balances reward policy is no less than a blessing. Talking about exclusively UAE, usually, credit cards offer rewards in the form of cash backs, air miles and loyalty points and all these things worth it. But you can get the best out of these reward policies and bonuses when you exactly plan according to your needs and limits of spending. Choosing a good credit card will save you from may hectic points and reward you many stances. May online sites make an analysis for you and they help you out in choosing the best card out of many.
The annual fee does play a role?
Many people think that annual fee does play a role in defining choices of credit cards. But this is just a myth. The only trade-off of money occurs between interest rates and rewards. The annual fee has a minimum role because this is just a matter of a few hundred while paying a lump sum amount at the end of each ear.
The types of reward you can collect via credit cards
The vouchers
You can have salon, restaurants and may other visiting vouchers to many places as rewards of spending money by using credit cards.
The credit score matters a lot in your credit history and credit card issuers know it. That’s why they show loyalty points as your reward to make your reputation more grounded towards them and others.
Air miles
The rewards on credit card spending can be in the form of air miles, in this way you can travel a few air miles free of cost.
Sometimes cash backs too
Rarely but yes, sometimes you are offered a ratio or percentage of cashback on your spending from credit cards. This can be said that you get an off on interest fee that you ought to pay.
Hotel staying voucher
These rewards can be in the form of hotel staying vouchers where you can experience free of cost stay because you get a reward from the credit card.
Merchandise
Sometimes you receive the merchandise in the form of reward that you have made purchases by using a credit card.
