Rewards Credit Cards

Gregory J. Cook, EA, CPA+
Accredited Tax Advisor
Past President Alabama Society of Enrolled Agents
Past President Alabama Association of Accountants

Rewards Credit Cards: Getting the Perks You Deserve

Rewards credit cards are popular choices today. As credit card companies battle each other for business, it is become apparent that the consumer is the one who benefits most. It is possible to earn all types of free rewards. Choosing the right card will help you do so much faster.

The average reward system is points based. This means that you will receive a certain number of points for each purchase you make using rewards credit cards. These points can be redeemed for a number of different items. What you can receive will vary depending on the company you choose to do business with. Free airline tickets are one of the most popular rewards, and you will find that many companies offer this reward.

Some points systems are straight forward, offering you a certain number of points for each dollar you spend, no matter what you spend it on. There are points systems in place that are more complicated to understand, but tend to offer a higher level of points. These offers tend to be based on the type of purchases you make. For example, you may be able to earn a set number of points when you buy groceries, a different number when you buy gas, and a different number for everything else.

Spending categories can rotate, which makes these systems even more complicated. That said, companies that offer rotating points tiers will always have that information available on their website. A simple visit to their website will tell you where to shop in order to receive the largest number of points. For some, this is simple, while others consider it to be too much of a hassle.

Those that do not wish to spend any time thinking about where to use their card will want to choose one of the rewards credit cards that offer a set number of points on every purchase. This is simply the easiest way to ensure that you are being rewarded each and every time that you use your credit card. Though the potential to earn higher rewards may not be there, if you are someone that would not take the time to work the system, you will come out just as well with this choice.

The number of points that you have should always be available when you access your account online. It may also be available on your monthly statements. Redeeming your points can also be done online, and should be a simple process. Simply choose the reward you want, and "cash in" the number of points that it takes to receive it.

There really is only one drawback to rewards credit cards, and that would be that in some cases points will expire. It will be up to you to make sure that you use your points before this happens. Aside from that, there is no disadvantage to being rewarded for all of your credit card spending. Getting the perks you deserve is as easy as selecting the best rewards based credit card.

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Greg Cook on the Recovery Act ...

The Recovery Act was passed by Congress and signed into law by President Obama on February 17, 2009. The purpose of the $787 billion Recovery package is to jump-start the economy to create and save jobs. The Act specifies appropriations for a wide range of federal programs, and increases or extends certain benefits under Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also reduces individual and corporate income tax collections (to an extent), and makes a variety of other changes to tax laws.

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This Act will have far reaching consequences and we will be dealing with it for years to come (at least until 2018). Twenty-eight different agencies – such as the Departments of Education; Health and Human Services; and Energy – have been allocated a portion of the $787 billion in Recovery funds. Each agency develops specific plans for how it will spend its Recovery Act funds. The agencies then award grants and contracts to state governments or, in some cases, directly to schools, hospitals, contractors, or other organizations. The agencies are required to file weekly financial reports on how they are spending the money and their specific activities related to Recovery funds.

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Have You Refinanced Your Home?
If you are one of thousands who locked into a lower home mortgage interest rate, then you've hit the savings jackpot! Besides getting one of the lowest rates in decades, you may be able to deduct some of the refinancing costs when you file your tax return. The “points” paid to get a home mortgage may be deductible as mortgage interest when you itemize on Form 1040's Schedule A. Points paid to get an original home mortgage may be fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, you figure the interest deduction by dividing the points paid by the number of payments you will make over the life of the loan. You may deduct points only for those payments made in the tax year. Say you paid $2,000 in points and you will make 360 payments on a 30-year mortgage. You could deduct $5.56 per monthly payment, or a total of $66.72 if you made 12 payments in one year. If you used part of the refinanced mortgage money to finance improvements to your home and if you meet certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid.

Also, if you are refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off. Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. And the amount of your adjusted gross income could affect the amount of deductions you can take. Any way you look at it, between the lower interest rates and the tax savings, that's money you can take to the bank. For more information on deductions related to refinancing, contact your Cook and Co. Advisor.