The appeal of credit card rewards programs is easy to see, but when it comes to the fine print, do the rewards really outweigh the negatives? With promises of free travel, airline miles or discounts on merchandise, you may be quick to sign up for rewards card programs. But, before you apply, weigh the pros and cons of credit card rewards programs from cash rebates to high interest rates .
Bonus Points – From first use to specialty spending, you can rack up rewards points by simply using your card.
Cash Back – Many rewards credit card programs reimburse you for monies spent on special purchases, offering rebates or cash back annually.
No Extra Effort – You are rewarded for purchases you would have made with a regular credit card anyways.
Discounts and Rewards – Your credit card spending can earn you savings, complimentary trips and services you would not otherwise receive when you sign up for a credit card rewards program.
Minimum length of membership requirements – You may lose bonus points if your credit card is opened less than a specified period of time, such as six months.
High Interest Rates and Annual Fees – Costly annual fees and interest rates higher than the average credit card can add up quickly, so make sure you're in a position to pay off your balance each billing cycle. However, not all credit card rewards programs impose such high rates, especially if you boast a high credit score, so check your lender's credit report requirements before submitting an application.
No Rewards for Balance Transfers – You do not earn rewards points for balances transferred to your account.
High Spending Requirements – Substantial rewards, such as free flights and hotel stays, take time to accrue and may require you to spend significantly to rack up enough points.
Rewards Limitations – Even once rewards are earned on your credit card account, blackout dates, seat restrictions and expiration dates may inhibit your ability to cash in on your benefits. However, not all cards impose these restrictions so check with the lender before deciding on the credit card rewards program that is right for you.
When weighing the pros and cons of credit card rewards programs, verify that your spending style and budget fall in line with the rewards card's demands. Otherwise, you may be prompted to spend more than you should in order to obtain the benefits. In which case, constantly playing catch up and forking out additional funds in interest charges and fees may supersede the rewards you are earning.