Rewards Credit Cards: Worth The Hassle?

Most credit cards from major issuers are automatically tied to a rewards program.  Rewards, after all, encourage more frequent use of the card, apart from giving the cardholder a little something back in exchange for using it.  Considering that credit cards represent a huge profit source from many banks and lenders, do rewards really benefit you more?  Or are they just another ploy to entice you, without any long-term benefits?

Should you really go for a rewards credit card or just apply for a card with a local bank?

1. Spending More

In order to earn more rewards, you’ll need to spend more.  If you’re buying stuff on credit and not settling your balance month to month, any amount you gain in rewards will likely be eroded by the premium you’re paying for the debt.  That’s a recipe for disaster.

2. Regular Consumer Spending Doesn’t Maximize Rewards

With the stingy points and earnings from rewards cards, it’s impossible to derive any considerable benefit if you only use it for regular consumer expenses.  Groceries and utilities will only represent a small amount of points earnings every month. Unless you can use it for business expenses (e.g. online advertising, travel), any points you earn before the expiry date will be paltry at best.

3. Higher Fees

Because rewards credit cards supposedly offer you more, they usually come with higher fees, interest rates and approval requirements.  If you’re not earning too many cash back or points based on moderate use, those extra costs are essentially paid for no added value whatsoever.

Worth The Hassle?

While rewards credit cards may look attractive on the surface, they’re not the best card for everyone.  Unless you use your card to spend a considerable lot (that’s way beyond your typical monthly expenses), the benefits you’ll derive from them are hardly all that enticing.