Student life seemed like “centuries” ago, you’ve worked your way up the corporate ladder or established your business with decent earnings to boot. You have been spending quite frequently on groceries, dining or travelling — have you ever thought of picking up a rewards credit card to get more value out of your spending?

A rewards credit card carries an incentive or rewards for usage i.e. through cashback, merchant discounts to airline miles.

What are the types of reward cards out there and how do you pick the right one?

Cashback Credit Cards

A cashback credit card offers an incentive where a percentage of the amount spent is paid back to the cardholder by the bank. If you’re wondering where your cashback comes from, the answer would be the interchange fee where merchants pay credit card companies for each transaction. For instance, if you paid $100 with a credit card, a merchant will only receive $97 (depending on the percentage agreement between the merchant and the bank). The remaining amount is then charged by the bank as an interchange fee, a part of which could be offered as cashback. Keep in mind that not all cash back credit card offers the same rates. Always survey different card issuers and pick the one that benefits you the most.

Points-based Rewards Credit Card

A points-based reward credit card typically helps you to earn points on each purchase. These points are then be accumulated and can be redeemed for merchandises in the rewards program. One of the most common points rewards credit card in Cambodia is offered. An example of how a rewards system could work is by earning 1 point with every $2 spent. At every 500th point, you can opt to exchange for a discount voucher or a gift equivalent to $5. Another example is by offering a special discount of up to 50% when you purchase at participating merchants. The best part? Most credit cards don’t place a time limit on the validity of points. Hence, you can accumulate as many points as you want for any given time for a particular reward.

Travel/Miles Credit Card

If your job requires you to travel often, owning an travel rewards credit card is a smart financial move. Travel rewards credit card offers rewards in the form of points or miles that can be used for travel-related purchases. For instance, in-flight service discounts or hotel rooms. While this may sound amazing, these cards often come with annual fees. Do your research prior to applying for one and weigh the options available to see if it fits your lifestyle.

Factors to Consider before Applying for a Rewards Credit Card:

While it may be fun to earn cashbacks and redeem rewards, here are some factors to consider before applying for one.

Annual fees

Annual fees vary from card to card, ranging from zero to hundreds of dollars, so make sure you’re earning enough rewards to offset them.

Foreign transaction fees

Some rewards credit cards waive foreign transaction fees when using abroad, while others do not. Make sure you choose after analysing your transactions and travel plans.

Perks and Bonuses

Some cards offer special deals like access to airport lounges, movie tickets and more. Make sure that you choose a card with perks most suited to you.

Late payments

Always check the minimum monthly repayment. This is so you understand the rates of late payments and how it can affect you.

If you are in healthy financial shape, then a rewards credit card is worth considering in order to maximise the returns on your spending. Be sure to pay your balance on time in order to not accumulate debt and enjoy the payoff of holding a rewards credit card.