The Downside with Reward Credit Cards

Rewards Credit Cards can be very useful and helpful. But, if one is not careful, it can lead someone to a financial disaster.

What makes a Reward Credit Card option very attractive? It is the promise of getting a reward for using the card to pay for purchases and services. The fact is this: everyone loves a reward, and more often, how much the reward is, or what form it takes, is not really thought of considerably, more so in the case of Reward Credit Cards. The premise is this: with or without the promised reward, the credit card holder will still make purchases and pay for services – so getting rewarded for doing so is not really a bad idea.

Here’s where the problem begins. If and when the credit card holder is not careful, there is a big chance he can easily overextend himself chasing for more rewards.

Most credit card holders forget that protecting the credit score and staying out of debt should always be the priority, even when getting fringe benefits from the credit card.

Things to Remember When Using Rewards Credit Cards

Be Careful with Everyday Purchases. There are Rewards Credit Cards that will give credit card users points when they use their credit card for everyday purchases. This can work, but only if the credit card user treats his purchases in the same manner he treats his cash purchases.

To explain further, imagine that the main purpose of the credit card owner for using his rewards credit card is simply to avail of the rewards. Ideally, if this is the case, the most logical step he should do after he pays for his purchases with his credit card, is to immediately set aside the cash equivalent of his purchase in a savings account, or even in a simple envelope, so that when the time comes for him to pay the bank, the money is ready. If the credit card owner has the discipline to put the money aside, it will keep him away from credit card debt.

Always Pay the Credit Card balance in Full Every Month. This is especially true with credit cards with high interest rates. Remember that if the card owner carries a balance, the finance charges on the credit card can rapidly overshadow the promised benefit of the rewards. When this happens, the card looses its significance.  

Never Exceed the Allotted Credit Limit. Credit card holders are advised never to max out their card or go over their credit limit, even if they can afford it. Remember that credit score takes into account the level of debt. High credit card balances cost precious credit score points. On top of that, going over the credit limit causes fees and increased interest rates. Again the rewards become immaterial when this happens.

Avoid Charging More than What You Can Afford. If you own a Rewards Credit Card, never be tempted to charge more than what you can afford just to get more rewards. Always have in mind that no credit card reward is worth going into debt, not a free plane ticket or even a $250 gift card.

Purchase only what you need; avoid spending on things that are unnecessary, or things that are not very urgent. Make wise decisions about purchasing items you need versus those you simply want. Use the credit card responsibly.

Siena Lombardi is a senior content writer for AccessRx.com, an established U.S. online pharmacy where consumers can purchase medications online. Make sure to visit their YouTube page to learn important tips on safely using medications online.