Are Rewards Credit Cards Worth It?
Rewards credit cards offer perks such as points and cash back, but they may come with fees and potential drawbacks. Understanding how to evaluate their benefits can help determine if they fit your financial needs.
How Rewards Credit Cards Work
These cards provide rewards each time you make a purchase. Depending on the card, rewards may be earned as cash back, miles, or points. Accumulated rewards can then be redeemed for travel, statement credits, gift cards, or merchandise.
For example, if you earn 2% cash back and spend $1,500 per month, you could receive $30 monthly in rewards, totaling $360 annually.
If the card charges a $95 annual fee, the net benefit would be reduced to $265. This calculation is useful to decide whether the card’s benefits outweigh its costs.
Types of Rewards
- Cash back on purchases
- Travel miles redeemable for flights or hotels
- Points exchangeable for various rewards
Advantages and Considerations
- Rewards credit cards can be lucrative when used wisely.
- Their value decreases if you pay interest by carrying a balance.
- Reward program changes can affect previously earned rewards.
- Redeeming rewards regularly helps preserve their value.
Rewards credit cards are best suited for individuals with strong credit and disciplined spending habits.
When considering a rewards card, evaluate your spending patterns and the impact of fees to decide if the card fits your financial goals.
Summary: Rewards credit cards offer valuable perks but require careful use and fee consideration to truly benefit disciplined spenders with good credit.