Credit Card Rewards Are Very Helpful
November 24, 2008
When credit cards offer “rewards” to their cardholders, it is done in connection with the number of purchases the customer makes with the card.The variety of rewards offered by credit card companies is virtually endless, with some of the popular rewards being air miles or discounts off of the cost of certain airline’s flights.Many stores and retailers also offer “loyalty” rewards if you are using a credit card issued in their name and some credit cards will give the opportunity to earn discounts on the purchase of a new car.
However desirable some of the rewards offered by some credit cards might be, the question that must be asked is whether or not these rewards are worth it.You can answer this question for yourself by making comparisons between the interest rates on purchases made with cards having rewards and cards that do not have rewards.Even if there are many credit cards which offer rewards or loyalty bonuses, the lowest rate of interest on these cards is most often around 15% APR.This interest rate is much more than the zero percent interest rate on the introductory offers of many other credit cards and about 7-8% more than the interest rate of a basic low-interest credit card.Across the whole range of reward cards, the interest rate comparison becomes even more alarming, with some interest rates exceeding well over 30% APR.
It may be worth reconsidering the choice of a credit card that has a lower interest rate and no rewards, if you are a regular credit card user who has to pay these higher interest rates in order to earn sufficient points for desired rewards.If you are the kind of credit card user who always tries to pay off the whole balance on the card before the payment is actually due, and who therefore never pays any interest, the rewards for using your card are genuinely free.If you are not sure if you can maintain the discipline of paying off the total balance on your credit card each month, then an alternative worth considering is the cash-back credit card.The way the cash back credit card works, is to pay cash back to the card user in accordance to what is spent on the card each month and this is also the same basic working principal of the credit cards that offer rewards.
Since the best current cash back rate is in the area which runs about 5% and the spending you do on the card attracts around 19% APR in interest, you will unfortunately end up paying quite a lot for the use of the card.If you have developed the habit of paying all of your outstanding balances each month to avoid paying interest, you can of course, put the 5% cash back into your own pocket.
If you intend to maintain a strict personal practice of repaying your balances every month to avoid paying interest, it may be wise to use the credit cards that have cash back and rewards attached to some of them such as gas credit cards.When used in this way, these credit cards can be very beneficial to your personal finances.
Tags: credit repair
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