Credit card companies have to be more creative in convincing consumers to spend using their plastic cards. Aside from the many promos and freebies offered, many credit cards now come with reward programs. Not surprisingly, those rewards effectively persuade many people to sign up and use plastic cards.
Always remember that credit cards are still a form of a loan. You will enjoy the benefits and convenience of cashless purchase transactions. But you will have to bear the interest charges and other fees that come with it. Those charges comprise the revenues of credit card firms. If you will review the high annual profits of those companies, you will be surprised at how they make money from consumer spending.
Reward programs of credit card products are intended to further boost consumer spending using plastic cards. Those programs are heavily marketed and advertised. Are you interested about the airline miles rewards, gift certificates, and other freebies that are offered by those reward systems? Before you sign up and obtain any of those reward cards, sit back and think it over.
Here are four reasons why you should not consider getting one.
- Credit card reward programs are meant to encourage consumers to spend more often using their plastic cards. That is because reward points are earned only after spending using the card. In many cases, credit card owners become more motivated to spend, setting aside any concern about high interest rates and greater accumulated purchases. They usually end up getting more debt due to overspending.
- Credit cards with reward system often come with higher interest rates and additional charges. You should notice this fact. These cards are often marketed highlighting the possible perks and rewards, notwithstanding the possible costs that can be incurred. Sometimes, the total of all the excess charges and interest rates in a given period can be equal or even more than the amount of the reward provided. This is the reason it is more advisable to just save money to spend for the expenses covered by credit card reward programs.
- Reward credit cards usually come with higher standards specifically for credit scoring. Many consumers’ credit card applications are rejected due to this. It should be noted that such cards are often offered and provided to people who have greater income and who have better credit scores. You might be wondering what harm credit card application rejection can cause you. For one, it can surely pose a negative impact on your credit rating.
- Many cards with rewards come with attractive introductory offers. Most of the consumers are misled to thinking that those will last for some time. But usually, those special offers just last a month or two. By the time the offer has lapsed, the cards can get more expensive and less useful. There are many other pitfalls that are looming along with the use of reward credit cards. That is why many experts advise consumers against getting into the fad to obtain and use those plastic cards.
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