If you already own a rewards credit card then you know how exciting it can be, especially if the rewards you are getting are really valuable. Every year thousands of people apply for different types of rewards credit cards, so they can get more back from what they spend.
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As thrilling as it is to be rewarded for spending money on your credit card there are a few hidden dangers you need to know about.
Yup, and if you don’t pay attention to the fine print of your reward credit card details it can lead you down the path of getting into some financial trouble.
So, you’re probably wondering about what kind of risks there are and even better, how to avoid them?
Or even better yet, what is the best way to use your card that will benefit you the most?
Here is a list of some of the hidden dangers associated with types of cards and what you can do to protect yourself:
Leaving the Balance Unpaid.
It is common knowledge that reward type credit cards are notorious for having much higher interest rates than typical non-reward cards. This means, that if you carry a balance on your account you will be liable to pay all of the additional interest rate in full.
These APR’s can range anywhere from 17% to 20% depending on the credit card company rate policies. What generally happens is the more rewards that you are able to get means the higher the interest rate you’ll have to pay.
So if you are usually carrying a balance, these extra charges you’ll be paying in fees and interest will offset the value that you’re getting from your rewards credit card.
The bottom line here is simple, if you are going to use a rewards card, don’t carry a balance on it or the perks and benefits won’t be worth it.
Letting yourself become penalized.
The credit card companies are always more exacting when it comes to penalizing you. For example, the over the limit and late fees will generally be much higher than non-reward cards. To make things worse, you run the risk of losing the ability to redeem your rewards if you are usually late making your payments.
You have got to spend more to get rewarded. There are many reward card holders that get a little excited and have the tendency to binge spend, so they can earn more rewards.
This is a bad habit and will set you back quite a few dollars. And when you try and earn more points by buying things that cost more and that you really don’t need in the first place, you’ll find yourself swamped with a bunch of bad credit that you defiantly don’t want or need.
Not reading the fine print.
There are many people that make the mistake of applying for a rewards card and don’t read the fine print. This is a bad idea because you run the risk of ending up with a high interest rate on your card and losing money in the long run. Make sure you take the extra time to read all of the terms and conditions before you go to town with your new card.