Tips to steer clear of debts caused by rewards credit cards

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Credit Card Applications » Research » Guides » Travel with Credit Cards » Tips to steer clear of debts caused by rewards credit cards

Tips to steer clear of debts caused by rewards credit cards


Updated: December 26, 2012

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Rewards credit cards are undoubtedly the most preferred cards by people from various parts of the world. Unfortunately though, the cost of these cards and the terms and conditions associated to them are so stringent that people can get into credit cards debts easily if they do not spend wisely on credit cards that offer rewards. Most of the time, consumers are carried away by the rewards on the card that they do not think twice before using their card for making the purchase. In an effort to accumulate the points and redeem it at the earliest, they end up spending lavishly on their credit cards without second thought. By the time they realize their folly, there are faced with an enormous credit card bill with no means to repay their debts. In order to prevent falling prey to the debts incurred due to the rewards credit cards, there are a few points that you need to keep in mind in order to use them wisely. Repayment in full When you have credit cards that offer rewards like air miles and other premium rewards, it is imperative that you repay the balance in full each month. This implies you need to spend only the amount that you can afford to repay the following month. Set a limit up to which you can use the card each month and stick to the limit to avoid burdening yourself financially. It is better to be safe than coming up with ideas at a later time to clear up the financial mess created. Even a part payment of the balance will not work in your favor since the remaining money will amass interest which is surely bound to be higher as compared to regular cards with no rewards. Stay within prescribed limits One of the most foolish things you can do with your card is to use the maximum limit available, or worse, go over the limit offered by the banks. This move will land you in the bad books of the credit card issuer who will then levy overhead charges to your already high outstanding balance. The penalties for late payment and financial charges on reward cards are pretty high. Hence, it is imperative to stay within the available limit offered by the credit card issuers. You can spend up to 30% of the limit available on the card without it being reported to the credit bureaus, but once you cross the 30% limit, banks report your transactions to the bureau which will then reflect in your credit history. Maxing out the limit on the card or exceeding it can have a negative impact on your credit history and pull down your credit score. Reward credit cards are not necessarily bad options. It should be considered only by people who can afford the costs that come with the territory. Opting for them when you have no means of repaying the money can have devastating effects on your financial well being.

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