Many reward cards have annual fees attached to them, but they are usually somewhat lower than other types of travel or cash-back cards, so many people still opt for them even so. 

What Are Some Examples of Rewards?

Cashback Rewards - A percentage of every purchase made with the card will typically be returned as a rebate on each bill. For example, if you spent $100 with your credit card and had a 1% cashback rate, you'd earn $1 to apply to future purchases.

* Most rewards cards offer 1-2% cashback on all spending.

* Some reward cards have rotating categories that offer up to 5% cashback on select purchases.

Airline Miles - Frequent flier miles are one of the most popular types of rewards. Each mile earned can be redeemed for free or reduced airfare depending on the airline you choose.

Travel Rewards - A travel reward card typically offers points or miles redeemable for hotel stays, cruises, rental cars, and other forms of transportation as well as airfare. Many travel rewards cards will enable users to pool their points so they can redeem them for larger items, such as a weekend at a five-star hotel or an entire vacation.

Statement Credits - A statement credit will earn the cardholder money that they can apply to their account balance to pay off outstanding balances. Deals are often offered if you sign up for another service with the issuer of the credit card, making it easy to receive more rewards.

What Are Some Disadvantages of Reward Cards?

Annual Fees - Some reward cards come with annual fees attached. This means that users need to make sure they repay all balances by the end of each billing cycle or else risk losing out on earning potential due to interest rates and fees piling up over time. If you opt for one of the no-fee reward credit cards, make sure you are aware of how to maximize your rewards before committing.

Credit Limit - Low limit credit cards (subprime) typically come with higher interest rates. This means that if you exceed your credit limit one month, you'll likely be stuck paying an above average APR cost without warning. Some subprime cards can have fees attached just for exceeding the limit, so it's important to increase your spending power gradually or else risk major financial issues. Read about increasing your credit score here.

Other Disadvantages - Cashback rewards will lower the amount of money available in your account to use for adding value to other areas of life, such as investments and saving for retirement. Additionally, cash-back is not a substantial amount and in most cases will not be sufficient to pay the full sum of your credit card bill. Tread lightly when applying for a reward credit card, since you will need to make sure that the benefits outweigh any potential risks.

Conclusion

Reward credit cards offer a great way to earn money back, but they come with risks and disadvantages that need to be considered. If you're applying for one of these types of cards, make sure you understand the terms and conditions before committing. There's no such thing as the perfect card. The best choice will depend on your lifestyle goals and how much risk you want to take on in order to reap rewards.