Are Credit Card Rewards Worth It?
Are credit card rewards such as cash back or travel perks worth it? Should you use multiple credit cards to get better rewards?
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Are Credit Card Rewards Worth It?
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On May 9th, the Marietta Times ran an article written by NerdWallet. “Why Family Loyalty Shouldn’t Apply to Your Credit Cards.” It encourages people to shop for things like cash back perks and travel rewards. It also encourages people to consider using multiple cards to maximize those rewards.
Are The Rewards Worth It?
Are credit card rewards worth it? You know those frequent flyer miles or cash rebates for your purchases. For some people, the answer is yes. I’ve personally benefited from using travel rewards on my credit card purchases.
But there is a caveat. The rewards are only worth it if you pay your full balance each month.
The Basic Math…
You buy $100 worth of groceries. Your card gives you 2% cash back, so you get a $2 reward. If you pay your bill, it’s $2 in your pocket. But if you only make the minimum $10 payment, you’ll spend more in interest than your perks are worth. And that will happen in two months or fewer too
Should You Use Multiple Cards?
I think this adds more complexity than it’s worth. You have to keep track of more things, make more payments, and stay more organized. From my experience, simple is better, cleaner, and reduces mistakes.
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The Verdict: Good for Some, But Not Everyone
You have to be very careful with these so-called perks. They can be a perverse incentive. They can give you the rationalization to use your credit card, even if you can’t pay the balance each month. And they can cause you to spend more than if you were using cash or a debit card.
Are the perks and rewards worth it? For some, yes. But you must do it responsibly. If you can’t pay for all your purchases each month, the rewards don’t matter.
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About the Author
Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors. He specializes in helping hard working, middle class families plan for retirement.