Credit cards are something that most of us use. They provide a secure, easy way to pay and manage our finances and, if we pay them off monthly, we don’t pay much for the service. However, rewards credit cards have really grabbed the attention of many. And, I have not problem with that at all!

CIMB Petronas MasterCard Gold Credit Card
Creative Commons License Cheon Fong Liew via Compfight

What I do have a problem with is, many people are starting to look at their rewards balance like a scoreboard! And, as I’ve mentioned in the past, turning any form of debt into a game is not a good idea. Let’s face it, as those points go up, so does the amount of money you have to pay back. That being said, I figured that today, I’d go over the dangers involved in using rewards credit cards.

The 3 Most Dangerous Aspects Of Using Rewards Credit Cards

Becoming Addicted To Spending – I often tell my clients that seem to lack control in spending and savings not to use cash back credit cards. Also, if you have an addictive personality, chances are, cash back credit cards are not a good option for you! Why? Well, I couldn’t tell you how many clients I’ve talked to that have told me, “I don’t know what happened, I just got addicted to watching my rewards balance go up and figured I’d pay the debt off later.”. This is the single most dangerous part of using rewards credit cards.

Dangers To Credit Scores – Although, I’ve noticed this one more with consumers using cash back credit cards, it can happen with any rewards card. Wanting to reach that next reward category or amount of cash back, many consumers spend more than they should on their cards once or twice a quarter. But, in doing so, many times, their balances become more than 50% of their credit line, the first sign consumers show of financial hardship. This pattern often causes reductions in credit scores that can take 6 months to a year to fix.

Misconceptions Of Rewards Programs – When most lenders promote an offer that gives you 1% cash back on all purchases or 1 point for all purchases, they don’t really mean all purchases. What they really mean is all purchases up to a balance limit. The bottom line is, the banks are in business to make money. If they gave all of their money away without making any well, they simply wouldn’t be around. That being said, most rewards programs have a cap on the amount of rewards that can be earned in a year. Not knowing this, many consumers spend more thinking,”Well, maybe those last few purchases just didn’t qualify for rewards…”.

So, Are Rewards Credit Cards A Horrible Option?

No, absolutely not! Rewards credit cards are great. I mean, who doesn’t like to earn rewards for doing something that they would have done anyway. Most of us use credit cards, so, why not get rewards? The key here is making sure that you use your rewards credit card properly. You know, do things like send more than the minimum payment, make your payments early and keep control of your balance. If you continuously do those things, rewards credit cards would most likely be a great way for you to get a bit more bang for your buck!

About The Author – Joshua Rodriguez

This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance. Join the conversation with Joshua on Google+!


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