Are Reward Cards a Good Idea?

December 20, 2013 Updated: April 24, 2016

Although rewards credit cards seem to offer us great value, you should really think about if they’re a good option for you. If used responsibly, they can increase your buying power and help you save on purchases. But if used carelessly or you choose the wrong one, you could end up in a world of debt.

You have to remember that they work similar to regular cards…

  • The issuer sets the limit

  • The interest percentage is likely based on credit history

  • You have to pay the company within the given grace period 

One thing that makes rewards credit cards different is that you earn incentive points when you use it. In many cases, you earn rewards credited to your account. If you were to use it everyday, you could possibly earn between one and five percent of the charges made, allowing you to save on the total cost of the items or services paid for.

In addition, some reward cards allow you to increase your spending power just like getting a small bonus on top of your earnings. In most cases, reward credits are applied whether or not the account’s balance is paid in full every month. In the process, you can save all the incentive points and use them to treat yourself or a loved one to a treat.

Here’s an awesome tip (this is what my sister does) – save all the points and use them at the end of the year to buy holiday presents for the family.

Some reward card issuers offer a one-time rewarding systems to the ongoing cash back payments. For instance, you could get $100 after you make qualifying purchases using it or it may let you accumulate cash back points to make a special purchase anytime you want to.

I would like to raise a warning though. You should study any purchases carefully to avoid out of control spending. Remember that cash backs are limited and that rewards could be limited to special purchases, too. You can use sites like this to get the basics about a card, but always take the time to research multiple sources and if possible, talk to others who have or have used the card you’re considering applying for.

In the end, every terms and conditions still is dependent on the issuer and understanding such is up to you. If you do not comprehend certain parts in the T&C, talk to a representative of the issuing company for clarification.

Knowing the pros and cons of using reward credit cards can protect you from trouble, and understanding the risk they carry can help you find out if the incentive points are worth the extra credit obligation.