Credit card rewards programs seem to be getting better and better and better. These days, incentives like free trips, free checked bags, cash back, and sizable discounts can be alluring to even the savviest of spenders. While motivators like these (obviously) appeal to the average consumer, keep in mind that credit card companies are in the business of making money. They’re not really in the business of keeping your best interest (or your credit score) in mind. While having a credit card can improve your credit score overtime if you pay on time, we’d recommend you monitor your score closely to make sure no credit card (and its rewards) is harming it.
Credit Card Rewards
There is no reason to paint credit card companies as evil, but if you’re hoping to take advantage of all the rewards you hope to reap, you will have better chances at success (and the rewards at stake) when you play by their rules. Answer these questions and see if credit card rewards are worth it.
1. Do you pay your credit cards off?
If you can’t pay your cards off each month, the rewards aren’t worth it. That’s the bottom line. It would actually save you money to pay cash for the purchases and avoid paying interest over the next few months or however long it will take you to get your credit card balance back to zero.
2. Is there an annual fee?
Credit card companies are competing for your business, so if you don’t want to pay an annual fee, you don’t have to. Shop around and see what is on the market right now. Look for a credit card company that offers options without a fee. There is no need to pay an annual fee with so many options out there. Over the course of five years, a card with an annual fee of $95 will end up costing you close to $500. What could that money have gone to instead? Purchases? A savings account?
3. What about the fine print?
You may be led to believe rewards last indefinitely. You may be led to believe that rewards can be earned and spent at your leisure. That’s not always the case. Especially in regards to credit cards, you need to read the fine print. Yes, there can be a lot of it, and yes, it can be oh-so-tiny, but make sure you understand the rules of the game before you start to play. Be certain you can actually use the rewards you’re hoping to earn. Limitations, dates, and stipulations live in the fine print and when you sign up, your signature is proof you read and understood all of the information.
Keep in mind, too, that just because you received a reward one year, it may not be consistent throughout time. Credit card companies retain the rights to alter the program or restructure the system whenever they deem it necessary.
Consider these factors before you include another credit card in your wallet. When you think smart, you’ll be saving money in the long run. However, make sure also to keep an eye on your score so your don’t end up paying a lot for your rewards.