Nowadays, you can get credits cards that offer all kinds of “rewards” depending on how often you use them on your purchases. Some of the rewards they offer would be:
- Travel mileages
- Fuel rebates
- Gift certificates
- Partner stores discounts
- Loyalty points
- Cash rebates
Credit cards that have this kind of promo are usually called Reward Credit Cards or Cash Back Credit Cards. However, although their offers seem to be tempting, it is still important that you analyze carefully whether the offer can save you money or simply encourage you to splurge if you take the bait.
What is the APR?
Whenever you get offers like this, one important question should cross your mind: Is it worth it? To answer this, it is important that you look at the interest rate that would be applied to your “rewarded” credit card and compare it to the rate given to those “non-rewarded” types.
Although there are numerous cards that offer some kind of loyalty bonus or reward, by simple comparison you will notice that the lowest interest rate that these types have would be around 15% APR. Basic or regular cards usually have 7-8% APR. Hence, cash back rewards credit cards charge you 7-8% more than the basic type!
In fact, if you compare the reward type with low-interest cards, the difference would even be greater. Not to mention that there are credit cards that have introductory 0% rate that is good for one year. By doing some APR comparison you will know whether a certain cash back credit card is a good deal or not.
How do you Pay Your Card?
It is important to determine what type of a credit card payer are you? This can also help in deciding if you can really benefit with cash back rewards credit cards.
If you’re a regular card user that pays part of your dues every month and not in full, it would definitely be logical if you go for lower-interest non-reward card. You could just buy things that you really need and avoid wasting money paying for higher interest rates just for unnecessary rewards.
On the other hand, if you’re the type who constantly pays off your whole balance even before the due date, and generally does not want pay any interest, then the rewards that you’d get by paying on time would come as a good reason to get a cash back reward card.
So, if you think you have the discipline to pay your credit card company each month fully and in advanced, then you would really do well with a rewarded credit card. However, if you think you do not have this urge, then it is recommended that you just get a low-interest card.
No related posts.
Leave a Reply