The main appeal of getting a credit card these days is the fact that it brings you plenty of generous offers from the card company. But a lot of the times, a closer inspection of these rewards shows that you are better off not chasing after them, at least on the financial front. This isn’t to say that many people don’t derive great value from their credit cards. Yet, here are a few things you should keep in mind.
Nothing Is Really For Free
The same way a retailer offers items for sale at a discounted price, credit cards use their rewards programs to market themselves to customers more effectively. While they certainly deliver on the rewards they promise, they make up for the cost of that through the interest rates charged.
Last year alone, the APR on cashback cards was 2% higher than for other cards, and for gas station cards, the figure was almost 10% higher. Problem is, many cardholders do not know about the high interest rates they are being charged for the rewards card.
The Fine Print
It is appalling how much of their card information cardholders skip over and never return to. This is perhaps the single most vital factor to be considered when choosing a card. Only about 63% of users understand how rewards can be earned and redeemed, while 43% are not even sure if there is a maximum rewards limit on their card. What’s more, 30% are unaware if and when their rewards will expire.
The best cards out there give users 5% of the amount spent using the card, but not availing these offers or understanding terms and conditions can mean you are getting lesser benefits out of the whole thing. Credit card companies are notorious enough for keeping people in the dark about the best way to get and use their rewards.
You Don’t Save By Over-Spending
Companies constantly entice customers into spending over the mark to be able to redeem points and sign-up bonuses. For them, it is a common ploy that lets them draw in customers, who don’t watch the fact that there is a minimum spending requirement within the first few months of activating the card.
Over-spending to acquire bonuses isn’t uncommon, such as in the case of airline miles redemption. While you may earn a free flight, you rarely factor in the expenses at the vacation destination, and credit card companies are always rooting for it to happen.