I’ve written a lot about the benefit of using rewards credit cards. In a nutshell, they’re truly only beneficial to card holders who pay off their balances each and every month. The majority of credit card holders don’t pay down their card balances consistently so rewards incentives are the perfect trap to ensare customers in this financial quick sand of high interest revolving debt. Getting the most out of your rewards cards can be fraught with peril. But there are some things to be aware of that can truly help you navigate the path. But I cannot understate how important that first understanding the many pitfalls of rewards credit cards is if you hope to get anything out of them.
Some credit cards also provide what are known as “tiered” cash back rebates. With tiered cash back rebates, you may get 0.25% back for the first $1,500 in purchases, .50% back for the second $1,500 in purchases, .75% back for the third and a full 1% cash back only after you’ve made a full $6,000 in card purchases. If you don’t spend much on your credit cards, the rebate percentage that you’ll earn probably won’t be worth the potential downside of finance charges. Not paying your card balance on this type of card even once will cost you more in finance charges than you’ll earn in cash rebates.
Some credit cards also require you to sign up for their rewards programs. The thought of earning 5% cash back on your purchases certainly sounds appealing. But for certain rewards programs, if you want to earn the full rebate amount, you’ll need to sign up each and every month to qualify for the program. This can be a bit of a hassle and easy to forget. These are not the type of rewards programs that I would ever recommend.
Another factor to keep in mind is the fact that many rewards credit cards give rewards based on specific purchase categories that you make. For example, a gas credit card may give you a higher percent of cash back for just purchases of gas but ONLY made at gas stations. Simply buying gas may not actually make that purchase eligible for the rewards program though. It really depends upon how the facility bills the credit card issuer. If the company bills the card issuer as a convenience store, your gas purchases may not count toward your gas rebate percentage.
Ask your local retailers for more clarity about how they categorize and bill purchases that are made on your cards.
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