Are Rewards Cards Worth It?

It’s ever so tempting. You see the credit card offers all the time offering rewards for your use of the card. Free flights, merchandise, gas... you decide by the rewards card you pick. But is it really worth it?

That depends on how you use your credit cards. If you carry a balance, the cards may not be worth the rewards. Why is that?

First of all, credit card companies are in business to make money. They make some of it from the merchants and some from you. If you’re carrying a balance, you are probably paying more in interest than you are getting in rewards.

Rewards cards often have higher interest rates than other credit cards. This higher rate is what covers the expense of giving you rewards.

You also want to watch out for annual fees and other fees. If the fees are too high, that’s another way your benefit from the rewards cards is decreased.

On the other hand, a no annual fee rewards card can be worth it if you pay your credit card off every month. You’re getting something you wouldn’t have otherwise.

Do your research when you choose a rewards card. Think about what you would actually use and what your spending habits will let you reach in a reasonable period.

Let’s use a hotel rewards card as an example. Free nights in a hotel, quite appealing. Or is it?

How often do you travel? Do you like that particular chain? Do they have locations where you would most often want to use them? What kind of effort will it take to get your free nights? Are there restrictions that will keep you from using your free stays at the times you are most likely to use them?

How many points per dollar do you earn? How does that compare to other offers? Do you get more points from shopping at certain places?

Your answers to these questions will help you to decide if a hotel rewards card is really the right choice for you. If it’s not the right choice, start looking at other credit card offers.

There are rewards cards out there for a wide range of travel, merchandise or even cash. These cards are not the wisest choice for everyone, but if your spending habits are appropriate they can be very worthwhile. Read through all the information about the card as you make your decision so that you choose one that will be right for you.

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Stephanie Foster makes it a habit to understand the various credit card offers. To learn more about what to look out for, visit www.knowyourcreditcards.com/learn/