Credit Card Rewards Aren’t Worth It Unless You Do This

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Don’t end up losing the value of your credit card rewards.


Key points

  • Credit card rewards programs enable you to earn points, miles, or other perks.
  • Rewards can be very valuable, especially if you use your card often.
  • It’s not worth using credit cards to earn rewards if you get stuck paying interest.

Credit card rewards can be worth quite a bit. You may be able to get cash back, free trips, or other perks that are worth hundreds or even thousands of dollars. And you can get all these benefits for spending you would likely have to do anyway.

But, while earning card rewards is a nice financial bonus, it’s not worth it if you don’t do one important thing with your credit cards.

Here’s what you need to do to make credit card rewards worthwhile

If you are using credit cards with the goal of earning valuable rewards, your decision makes sense financially only if you are also paying off your credit card balance in full every single month so you can avoid interest charges.

There’s a simple reason why paying off your card is essential in order to make using a card for the rewards worth it. If you don’t pay off the balance, the interest you pay is going to cost you far more money than you could ever make back by earning rewards. The math is clear on that.

See, most credit cards charge upwards of 17% interest on debt if you don’t pay off your balance in full. And cards have variable rates, so with the Federal Reserve (the US Central Bank) raising interest rates this year in order to help fight inflation, credit card debt is becoming even more expensive for most people.

Rewards, on the other hand, are never going to be worth 17% or more of the amount of your purchases. Even on the best rewards cards, you’ll typically get 5% back at most on bonus spending categories and much of your spending will earn you rewards worth around 1% to 2% of the money you charge.

If you are earning 2% back on your spending but paying 17% interest on it, you’re going to end up in the red. You don’t want this to happen, so unless you are confident you can pay off your cards in full, you should typically try to avoid using them – even if that means passing up rewards.

How to make sure you’re paying your balance in full

The good news is, for most people, it’s possible to ensure you are paying your balance off so you can use cards and get the benefit of rewards they provide without owing a fortune in interest.

To do this, you’ll want to start by making a budget and committing to it. If you know how much you can afford to charge on your cards for different types of purchases, you won’t find yourself with debt you are unable to pay.

You can also set up your cards to autopay so the full balance due is taken directly from your bank account. As long as you’ve made sure you have enough in the bank not to overdraft, this will guarantee you don’t get stuck paying interest charges on anything you charge. You’ll get the valuable rewards cards offer, without the added costs that come with financing charges, and you will end up better off in the end.

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