Don't Let a Rewards Credit Card Lead You To Debt

Rewards credit cards can be very, well, rewarding. If you’re not careful, you can easily overextend yourself chasing more rewards. Protecting your credit score and staying out of debt should always be a priority, even when you’re getting fringe benefits from your credit card. So, you should use a rewards credit cards with just as much caution as you would any other credit card.

Rewards For Everyday Purchases

Many rewards credit cards give you points when you use your credit card for everyday purchases. When it comes to standard credit cards this is an absolute no-no. If you choose a credit card that rewards you in this area, you can make an exception, if you do it the right way.

When you use your credit card for everyday purchases like groceries and gas, treat the purchase more like a cash or debit card purchase and subtract the funds from your monthly budget. Immediately put the money aside so you can pay your credit card balance when your statement comes in the mail. With this, there are no exceptions. Having the discipline to put the money aside will keep you away from credit card debt.

Rules of Thumb For Reward Card Charges

• Pay your balance in full every month, especially if your card has a high interest rate. If you carry a balance, the finance charges on your credit card can quickly overcome the benefit you receive. When that happens, your card isn’t very rewarding at all. Paying your balance in full is a habit that will benefit you in addition to the rewards you receive.



• Don’t charge more than you can afford just so you can get more rewards. No credit card reward is worth going into debt, not a free plane ticket or even a $200 gift card. You’ll have to live with the debt long after the benefit of the reward has subsided.



• Don’t max out your card or go over your credit limit, even if you can afford it. Remember your credit score takes into account your level of debt. High credit card balances cost precious credit score points. On top of that, going over your credit limit causes fees and increased interest rates. You’d have to receive quite a bit in rewards to overshadow these types of costs.