The numerous problems with credit card rewards - Products News

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The numerous problems with credit card rewards

The numerous problems with credit card rewards
The content is accurate at the time of publication and is subject to change.

Most of the credit cards that offer rewards have one thing in common, which is, they get customers into bigger debt when not used properly. Many credit card reward programs, including the frequent flyer miles, and general rewards on credit cards such as, discount vouchers, instant reward points and cash back schemes may seem profitable. These rewards however may not be as valuable, if one doesn’t use the credit card very often and if it is not the preferred mode of payment.


The credit card rewards according to many experts in the industry work as a luring device to make credit card customers spend more rather than saving .In fact, if credit card customers don’t clear the debt on time, they could find themselves in some serious debt. Therefore one thing which is most important is that credit card customers have to be much disciplined when it comes to making repayments on their expenses. One of the main issues with not repaying on time, is the high interest rates charged on credit card debt.


In general, credit card rewards usually bring higher interest rates than the non-reward credit cards. The difference in interest rate could be as high as 5% ; credit cards with greater rewards, come with a higher annual fee. In fact, customers who are having trouble paying off the debt on their credit cards in full, the extra interest, annual fees and late charges could easily overweigh the savings made by the credit card customers.


A better strategy would be to let go of credit cards with reward programs and instead choose credit cards with a low APR or interest rate. Even if credit card holders want to pick reward cards, it is a better option to pick cards with profitable reward schemes from the customers’ usage point of view rather than picking up rewards which are considered good. For example, customers’ who don’t travel often cannot benefit from a credit card which offers the best travel rewards amongst all cards. Such customers might benefit from cash back schemes instead.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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