Earning the opportunity to carry a credit card that offers a generous rewards program is an exciting feeling. Its a chance to get something back for your loyalty as a customer. Unfortunately, it can also be a double-edged sword if youre not careful and willing to do your research before diving in head first.
Your Mistakes Will Cost You
No matter how you slice it, earning rewards comes at a cost. How much that cost will be, however, can only be determined by you. The more you understand about your rewards program and how it works, the better off you will be.
In order to put yourself in the best position possible, you need to make yourself aware of the pitfalls that come with credit card rewards. Take a look below to learn about the 4 major mistakes you can make with credit card rewards and how you can avoid them.
#1 Failing to Understand the Cost of Your Rewards
Each time you make a purchase on your card, you expose yourself to potential interest charges and a range of other fees. The more you decide to rack up, the more you will pay. Its a fact of the credit card lifestyle that cant be avoided.
As an example, say youre currently earning a 2% cash-back reward on anything you buy. You decide to make a purchase of $100, which yields a reward of $2.00. With a 21% APR, your interest charges on the year for that purchase are a minimum of $21. The longer you take to pay your balance off, the more your charges will continue to increase. Suddenly, that $2.00 reward ends up costing you a whole lot more than you bargained for.
#2 Making Unnecessary Purchases to Increase Your Rewards
One of the biggest drawbacks of credit card rewards is the potential for it to become addictive. The idea of seeing your rewards balance grow bigger after every purchase can give you the urge to drive it up even higher, charging everything in sight to your credit card. Its nothing more than a recipe for disaster.
Remember, credit card rewards exist as a payback for being a loyal and responsible customer. Only take advantage of them when it benefits you, as driving up your balance is only going to put you further into debt.
#3 Not Paying Off Your Card Each Month
When it comes to credit cards that offer rewards, many of them tend to carry an interest rate that is higher than a regular card. If youre racking up charges and sticking to the minimum payments, the total amount of interest you accrue will outweigh the rewards youve earned.
To get the maximum benefit of your credit cards rewards program, use your card only for purchases you intend to pay off immediately. Everyday purchases like gas and groceries make great candidates, as they are expenses you will already need to budget for, thus helping you rack up rewards at a faster rate.
#4 Choosing a Rewards Card That Doesnt Fit Your Needs
Having a rewards card that fits your needs is the only way to ensure you get the maximum amount of leverage. Cards that fit your spending habits allow you to earn more rewards without spending more. For example, if you purchase gas frequently, a card that hands out higher rewards on gas purchases is better than one that gives you a flat cash-back rate no matter what you buy.
With that said, if you want to get the most rewards for the least amount of effort, choose a card you know you will use. Thats all it takes to effortlessly rack up the rewards!
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