Despite their bad reputation, credit cards can still offer a plethora of advantages. When used responsibly, they can be a great way to build your credit and maintain a high score. If you qualify for a credit card program that offers rewards, such as discounted travel or cash back, then there are those perks to consider as well. But are reward credit cards all they’re cracked up to be? While they can be a great way to score free things (and who doesn’t like free?), there are some negatives to consider as well. You may want to avoid using reward credit cards if any of the following applies to you:
You’re unable to pay your balance in full every month
Reward credit cards tend to have much higher interest rates than credit cards that don’t offer these perks. Therefore, although it’s always a good idea to pay off your balance in full every month—regardless of whether it’s a rewards credit card—it’s especially important if you’re making charges on a credit card with these incentives. By letting your balance carry over to the next month, you aren’t really receiving any rewards at all, because you are paying for them through high interest charges. If you know you’ll be able to pay down your balance every month, a rewards credit card can be good to use. However, if you can only afford the minimum, you may want to just opt for a regular credit card with a lower interest rate.
You feel encouraged to spend more than you normally would
Racking up a lot of points or cash back can easily give any consumer a bit of a thrill, but you’ll want to take a step back if it seems like you’re slowly developing an addiction to accumulating credit card rewards. It’s one thing to earn points or cash back on purchases you would have made anyway. But if you find that you’re spending a lot more than you would be because of the rewards, or you justify the purchases because of the cash back you’ll receive, you may want to stop using a rewards credit card. Even if you are paying off your bill in full every month, if you find that you’re spending more and saving less, you may be better off opting for a no-frills card with a lower APR.
You don’t spend enough
On the flipside, if you don’t meet certain spending requirements, you may not qualify for any rewards. Because reward credit cards commonly come with high APRs and/or annual fees, you may want to avoid opening up this type of credit card if you aren’t unlocking its full potential. If you’re spending annual fees and you never reap the benefits, you’re just wasting money.
Do you need cash to pay off credit card debt? If you’re receiving long-term payments from an annuity or structured settlement, Peachtree Financial Solutions may be able to help. We can purchase some or all of your future payments and send you your money sooner, in one lump sum. To learn more about selling future payments for a lump sum of cash, contact Peachtree Financial Solutions today.
Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services.