With the competition among credit card companies growing tougher by the minute, bigger and more exciting rewards are offered to cardholders. When managed correctly, reward credit cards can indeed be very rewarding. However, making the wrong choice and credit mismanagement can prove to be risky. In this article, let us discuss the common pitfalls that reward credit cardholders must avoid:
Excessive Interest Rates. Credit cards with rewards are expected to have higher APR than non-rewards cards. While non-rewards cards have an average of 3% to 8% APR, the interest rates on rewards cards in the market can range from 15% to 20%, depending on the issuer.
It is true that you can avoid interest rate charges by paying off your monthly balance in full. However, many reward cardholders only submit the minimum due payment, carrying over their balance plus interest rate on their next billing period. Such a habit can prove to be more costly and your interest rate fees may offset the value of rewards you earn.
Expensive Annual Fees. Aside from the APR, reward credit card issuers usually charge more expensive yearly fees which can range from $50 to as high as $80 or more. Before choosing a card, consider if it is worth paying the annual cost. Carefully consider your potential to earn and enjoy the incentives being offered.
Blackout dates and limits. Some issuers impose blackout dates which mean you can only redeem the rewards you earned within a given period. If you fail to redeem your rewards on time, all your hard-earned points could be wasted.
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There are also credit cards with rewards that offer limited value of rewards. For instance, once you have reached the maximum worth of $1,000, you may stop earning points even when you continue to use the card for purchases. Thus, it is crucial to be clear about the Terms and Conditions, particularly the disclosures of the issuer before signing up your contract.
Spend more to earn more. The best way to collect points is to use your credit card for your purchases. Nevertheless, that does not mean you should go beyond your budget for the sake of earning points. If you do, you are putting your credit at risk. Never charge anything to your credit card without considering your repayment obligations. If you are not sure whether or not you can pay off your balance on time, it’s best to put off the purchase.
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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