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An increasing number of consumers today are applying for rewards credit cards without realizing the underlying truth behind them. Though the concept of earning rewards each time you use the card seems to be appealing, the truth seems to be far from it. Card holders do earn points, but at what price? Every person who plans to apply for the rewards credit cards should know how they work and what to expect from it before signing on the dotted line.
Will you use the rewards?
Do not sign up for rewards cards only because you feel that the offer being given to you is too hard to resist. Remember the fact that promotional offers are valid only for a certain period post which the actual APR, fees and other charges come into play. Also, before applying for the card, sit back and think if you will be using the rewards on the card. If you are not a frequent flier, applying for the air miles card is not the right thing to do. You will only pay high fees without making use of the rewards. Instead, opting for cards that offer you discounts at major retail outlets and restaurants locally may work in your favor.
Redeeming your rewards
A harsh truth associated with rewards credit cards is that redeeming the points you earn is not as simple as you presume it to be. There are a lot of terms and conditions that govern each card in terms of claiming the gifts. Most of the time, the number of points you have to accumulate is set high. This implies that you will have to spend a lot of money using the card before you are eligible for redeeming your rewards. In the process, you will end up spending more money from your pocket as compared to the value of the reward.
The interest rates and fees
One cannot deny the fact that rewards credit cards come at a price. The Annual Percentage Rates of these cards are way higher as compared to most of their counterparts that do not carry rewards. The annual fees for these cards are also significantly higher, thus making them heavy on your pocket. These cards are highly risky since they can cause large debts if not used wisely. The promotional offers on these cards mostly run for a period of six months only, after which the regular APR and rates come into play. This is when reality hits the customers and by the time realization dawns, most of them would have incurred debts that they will have to struggle to pay off.
Rewards credit cards are only for consumers who have the means to pay off the huge bills that come with them. People who cannot afford to repay the complete outstanding balance on a month on month basis should not even consider applying for them. Instead, look out for other interesting cards that offer good APR and rates, but not rewards, as they are more affordable and less risky.