Rewards credit cards are not a new phenomenon but they most certainly have gained quite a bit of popularity in recent years. Banks and credit card issuers use rewards cards as a system of points and bonuses that the cardholder earns every time they make a purchase.

They are an incentive to gain new customers and retain current ones. The thought behind them is that once you start accruing bonus rewards points you will develop a loyalty to that credit card and will be less likely to switch to another credit card company.

There are several types of rewards programs on the market. The main categories include:

• Cash Back
• Airlines
• Retail Stores
• Gas Rebates

They are designed to establish and foster loyalty to specific brand names. Delta Skymiles from American Express is a good example of this. The BP Gas Rebate Card from Chase is another. Credit card issuers such as Chase, Citibank, Capital One and Discover Card enter mutually beneficial business relationships with each other.

Rewards credit cards can be an excellent way to earn some valuable bonuses on your everyday purchases, but there are several things that you must be aware of before you apply. First of all, many rebate credit cards carry higher interest rates to offset the cost of the rewards that they grant. Many also have rather high fees that accompany the card. Be sure that you understand all the terms of the offer before you fill out the application.