Question: Reward credit cards linked to retail outlets have been around in the UAE for some time now. How should I judge which reward card is the best and what should I be careful about? Is it only a matter of a better earnings reward card? When is the best time to cash in my rewards?
Answer: As you rightly comment, reward credit cards linked to retail outlets have been around in the UAE for many years and can come with some great benefits, however there are also some important factors to consider before signing up. Understanding what the aim of these cards is from a business point of view will give you a better handle on what the positive and negative aspects are.
Essentially these cards are designed to encourage customers to shop at the named store, rather than take their custom elsewhere, and are usually implemented as part of a wider business strategy aimed at promoting and rewarding customer loyalty. The cards work in the same way as ordinary credit cards, with the same rules and regulations, and are usually run as a joint venture between the store and a specific bank or lender.
The main advantage of rewards cards is that they offer users ongoing promotions and discounts on goods, often through bonus points in line with the amount spent on goods.
In deciding which reward credit card is best for you then you need to look at several factors. If your main objective is to save money on your shopping bills then you need to research which one gives the most bonus points on purchases, best discounts and free additional items.
If you are more interested in the credit card aspect of the cards then many of them offer extra benefits such as interest free periods, free balance transfers, cash loans, discount travel, free insurance and emergency roadside breakdown assistance. If you shop online then look out for cards that offer further discounts for online purchases.
However, where there are benefits there are also downsides. One of the main things to be aware of with store reward credit cards, and credit cards in general, is that the interest rates can be substantially higher than other types of debit card.
This means that to reap the benefits, you must be stringent about paying off the card debt each month. If you don't you could find yourself being charged a significant sum in interest rates and fees. You also need to bear in mind that strict cancellation policies are also common — with some stores requiring a written retraction to end the agreement, often a month ahead of the date you sever the contract.
Deciding when to cash in your rewards is a matter of personal choice. Some people like their bonus points to build up to purchase an item they may otherwise struggle to afford, while others like to use the bonus points to cut down on shopping bills.
The writer is Chartered Insurance Broker, Sales Training Manager at Nexus Insurance Brokers. Opinions expressed are the writer's own and do not reflect those of Gulf News. If you have any questions, please e-mail to advice@gulfnews.com
