Many card holders opt for the credit cards that offer plenty of rewards. Cardholders rarely consider the situation where they can do absolutely fine without these credit card rewards and end up saving more money than they intend to do with the credit cards. More importantly, plenty of credit card rewards are marketing strategies that tempt the cardholders to spend more than they intend to. As a result, they find their bills to have inflated beyond their budgets. Here are the top reasons why cardholders should look at to avoid credit card rewards
and instead, apply for credit cards that offer low interest rates and waive off the fees.
Maximum limits and caps
Most rewards aren’t really as fruitful as they seem to be. Almost every reward, whether it is cash back offer or loyalty points and air miles, come with maximum limits and caps, beyond which you cannot benefit from them. Besides there are monthly expiration dates for the loyalty points too. With these limits on the rewards, one can rarely benefit to the extent it seems possible at the outset. Hence this needs to be taken into account when you debate the utility of a credit card as opposed to another.
Rewards vary with credit history
Credit card rewards are not always absolute. They are relative. That is why you see that a cash back offer is publicized as 1 – 5% and not as an absolute number. The range is provided to accommodate customers with different credit scores. Those who have an excellent credit history usually get the upper limit for the reward while those with good or fair credit get the lower limit of the rewards. A great example is also offered by balance transfer credit cards with 0% introductory rate during the introductory period. This introductory period varies in length between 6 – 18 months depending upon the credit history of the customer.
Rewards might force you to buy more
To avail certain rewards you are forced to buy more. For example, a discount of 25% is offered for credit card purchases above $100 leading you to spend in excess of that, while you have budgeted for a purchase of only $25 - $50 initially. These milestone discounts can play havoc with your outstanding balances and your monthly budgets.
Rewards come with terms and conditions
Air miles will allow you to redeem them for discounts on air tickets. But there are blackout dates and the discounts are not valid sometimes for companion tickets. There are various other conditions which could force you to let go of your rewards as you don’t qualify for the terms and conditions.
Rewards lead to higher expenses
A shopping season reward of $100 rebate for $500 purchase in a 3 month time span would push you towards higher expenses. This will only lead to bigger outstanding balances and late and over the limit penalties in case you are unmindful of the credit card terms. It might subject you to a hike in interest rate too, leading to loss of whatever you have saved until then.