Financial Tips | Debt Management

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10/29/07

Rewards Cards?

Rewards programs are supplements to credit cards and should not be the primary reason as to why you get the card. In my opinion, the best reason to get a card is a low interest rate (and of course no annual fee, because there is absolutely no reason to have a card with an annual fee).

Look carefully at rewards card advertising. Many commercials state that you can get cash back from using your credit card. The commercials go on to show a person stating that they got $100, $200, or more back due to his/her “cash back” rewards card. These commercials are not telling you the whole story. Do not get me wrong, it is very possible get this amount back, but you have to charge upwards of $10,000 to get it. That is not a typo, $10,000 to get $100. That is 1%! Is it really worth it to apply for a card that offers 1% cash back, but has a higher interest rate than other cards? I do not think so either.

Also, make sure that the rewards card you want actually offers rewards that you want. Almost all credit card companies offer some kind of shopping mall in which you can redeem your rewards points. What if you do not like or need any of the merchandise in these credit card malls? What you end up with is a bunch of reward points that you will never use or, if you redeem your points, you will end up with a piece of merchandise that you do not want.

The point is, do not be awe struck by a credit card solely because it offers rewards. Get a credit card that has no annual fee and has a low, fixed interest rate. If you find a couple of credit cards that meet these criteria, then you can choose based on rewards. Just make sure you look into the rewards first so that you are not stuck with a 1% cash back rewards card or a point redemption mall full of unusable and unwanted merchandise.

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