How does a Rewards credit card work?

This is Jason.


I got this American Express Rewards card offer in the mail. I'm just trying to figure out how it works since I'm looking for another way to build more credit. It doesn't say anything about credit limit or anything. Is it like a debit card kind of?


Can somebody explain how these things work? Thanks!

American Express cards do not work the same as a VISA or MasterCard. You cannot charge things and pay them off a bit at a time. With AMEX, the full balance is due every month. The Reward part probably means you earn something like frequent flyer miles for using the card. Read all the literature carefully.

Not all AMEX cards have to be paid in full every month. My dad has one that he makes payments. It's that clear one with the blue square in the middle. I don't know about the other styles though. And I'm not sure about the Rewards one.

Jason, read everything very carefully. check their website as well, read as much as you possibly can before deciding. This includes the fine print.

Amanda

I don't think the Amex Air Miles one has to be paid in full each month. It's quite useful if you collect air miles.

The information sent also says that there is no pre-set limit and that purchases are based on your credit history, etc.

So basically you never know for sure if your purchase will go through or not unless you know you have perfect credit?

I'm not sure about AMEX. I use a Dividend Master Card. It's not tiered like Discover, it earns 1% (right off the bat) on all purchases & I believe 5% on supermarkets, drugstores, and gas stations. I never make checks. I use my credit card to pay for everything, but I subtract the charges from my checkbook, as though I were making a check. About once a week, I total up the charges & make a payment online.

I earn $300 a year from my Visa, which is the max... once I've reached the max that I can earn, then I start using my Discover card. Discover doesn't pay as well, so when the new anniversary for MC comes up... I go back to my MC.

I did the same thing with the GM Card before I bought my car. I didn't have that much time to use it, but I had earned $1500 towards the down payment from GM. If you plan on purchasing a GM vehicle within the next 8 years, it really pays to use the GM card. You can earn $500 a year for up to 7 years & then have one more year to use it.

I only use credit cards that pay dividends, I always record & subtract my spending... & always pay them off every month. You can't get into trouble that way... only make money!

No pre-set limit because with AMEX you are expected to pay in full each month.

Originally Posted by Deb25

No pre-set limit because with AMEX you are expected to pay in full each month.

Click to expand...

How do they make money if you pay in full each month? Do they charge you interests for the first month?
Or do you pay an annual fee or something?

Originally Posted by marie-p

How do they make money if you pay in full each month? Do they charge you interests for the first month?
Or do you pay an annual fee or something?

Click to expand...

My guess would be that most people don't pay in full each month.


This card does have an annual fee of $35

Originally Posted by marie-p

How do they make money if you pay in full each month? Do they charge you interests for the first month?
Or do you pay an annual fee or something?

Click to expand...

They make enough money from the people who don't pay off their balance & have to pay finance charges. They also make lots money from the retailers, it costs to accept credit cards... about 3% of the sale.

I better way to build credit is to take a small loan (say $5000) from a bank or credit union and repay it promptly. Credit cards-esp too many credit cards are not something lenders like to see on credit bureaus. Why? Say you have 5 cards-each with a line of $5000. Thats $25000 total credit limits. Even though you might not even use all the cards or charge up to the credit limit-it could be a possibility. Better things for your credit. A stable job and place of residence, checking and savings accounts.
Trust me I worked in for a major automotive finance company for 20 yrs and probably saw all the good and bad things people can do!!