Consumers are continually being enticed to apply for credit cards that offer a variety of rewards such as cash back, points and miles. Cash back cards pay you a percentage of qualifying purchases back. Other cards offer points or miles as a reward for every dollar spent. Before rushing to apply, consider the pros and cons of reward credit cards.
Pros of Reward Cards
Many reward cards have a sign-up bonus which pays you a premium if you pay a certain amount during the introductory period. Rewards cards can earn you cash or discounts that can save you money on travel or purchases, and some cards have extra benefits such as travel insurance or annual travel credits.
Cash back cards may offer the same percent back on everything, or they may pay a higher percent of cash back if you spend in certain categories. Points and miles-based cards may also pay a higher reward when you spend in certain categories. Rewards can sometimes be exchanged for gift cards.
Cons of Reward Cards
Many people don’t know all the rewards they’re entitled to and may end up forfeiting some of them. Rewards can also expire due to late payments or account inactivity. One disadvantage of rewards cards is that they may have an annual fee or high annual percentage rate. Once you pay for fees or high interest payments, it may end up canceling out the rewards. You may be tempted to overspend just to get sign-up bonuses or rewards.
Do You Need Good Credit for Reward Cards?
Reward cards can be a good deal as long as you save more than they cost. There are options in reward cards for people with all credit levels, and they can help you start to build a credit history if you don’t already have one. Cards with the best benefits can usually only be obtained by people with credit that’s good or better.
Building Your Credit
For the most part, rewards credit cards have more to offer than cards that don’t have any type of rewards. For the best deals, you’ll need to have good credit. To build good credit, make sure you pay your bills on time every month, since a single late payment can harm your credit score and can affect your ability to get the best credit opportunities for as long as seven years.
Another factor in your credit score is your total debt and the percent of available credit you’re using on revolving accounts. Borrow responsibly and avoid borrowing money just to get rewards. If you can’t remember what the balance on your credit card represents, you’re overusing your credit cards.
Accurate Credit Reporting
It’s important to make sure that your accounts are reporting accurately on your credit reports. As many as 2 out of 3 people find errors on their credit reports. If you find any errors, Dovly can help you dispute them. Dovly is an automated credit repair engine that can track and manage your credit so that you have peace of mind. Contact Dovly today.