Credit card companies come up with various reward systems not just to attract new customers but to keep old cardholders as well. Some reward credit cards may even offer the opportunity to enjoy the biggest savings to help you get out of debt. It is true that being able to get discounts from your regular purchases can help you save more so you can use the money for debt repayment.
However, reward credit card holders must be cautious about how they use their cards if they want to stay out of debt. The truth is, the improper use of reward credit cards may even lead you to a more serious financial situation than you expected. The reason? Credit cards with reward systems are typically accompanied by higher interest rates, higher annual fees, and higher penalty charges. With these costs in mind, it’s easy to see why not all reward credit cards are worth keeping.
The Real Cost of Credit Cards with Rewards
If you plan to get your own reward credit card, be sure to do your own research. Check out all the costs associated with your card. Know exactly how your interest rate is calculated. If a reward credit card offers an introductory APR, be sure that the regular APR would remain reasonable once the introductory period expires.
Ask yourself, “Will the interest rate fees and others credit card costs offset the value of rewards I can possibly earn?” Some reward cards may require you to collect a very high number of points to qualify for redemption. In this, you’ll need to carefully consider the question, “Will my reward credit card force me to spend more just to get rewarded?”
Benefiting from Your Reward Credit Card
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Generally, people with reward credit cards must avoid paying for the additional interest rate fees altogether. This can be done if you can pay off your entire balance each month. Therefore, you should avoid charging purchases to your reward credit card that are too large or would force you to carry over a balance. If a certain item is too expensive to be paid off in full, then perhaps you may consider delaying the purchase until you’ve saved enough for its full payment.
Here are other great suggestions on using your reward credit card and avoiding the trap of credit card debt:
1. Find a credit card with a reward program that matches your lifestyle.
2. Make sure that you clearly understand all the rules of the reward program.
3. Pay off your utilities and other bills that you need to pay in cash with your reward credit card to collect more points at a faster rate.
4. Take advantage of your reward credit card’s 0% APR introductory rate by using it for all your essential buys.
5. Never be late in submitting your payments.
Ann Wilson is the head writer of Reward Credit Card Site. This resource provides consumers with valuable reviews and information on the best credit card reward programs. Its main objective is to help people to take advantage of credit card rewards and start earning reward points. Copyright © 2008
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