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What kind of rewards does your credit card offer? Cash back, frequent flier miles, and gift certificates are just a few of the great benefits you can get from some credit cards. While it’s great to get a free dinner or some cash back just for using your credit card, these rewards often have a dark side for consumers. Many people find themselves endlesslychasing their rewards, charging everything to their card just to reach that next benefit. It can lead some people down a dangerous road if they’re not careful. Here’s a look at some of the dangers of charging everything to your card and how you can get the most out of your rewards.
The Perils of Charging for Rewards
- You may have some grand plans to earn hundreds of dollars cash back from your credit card, but be aware that most reward programs set a cap or annual limit on rewards. Others even require that you spend a certain amount on your card before the real deals start to kick in.
- Chasing credit card rewards almost always leads to carrying higher balances on your credit cards. While carrying a high balance is rarely a good idea, most reward cards have higher interest rates than standard credit cards, meaning you’re probably paying a hefty price for those rewards. You can truly take advantage of credit card rewards when you can afford to pay off your balance each month.
- Another possible problem with charging everything to your card just to earn rewards is the risk of damaging your credit score. As mentioned above, many people end up carrying high balances on their cards from chasing rewards. Generally speaking, maxing out your credit cards, or even coming close to your credit limits, can have a negative effect on your score. Also keep in mind that simply applying for new lines of credit can lower your score too!
Getting the Most out of Rewards
- Almost everyone has several forms of utility bills that need to be paid each month, why not put them on your card and pay the balance off each month? This way you earn rewards on something that has to be paid anyways. You can typically set-up your cable, electric, gas, or other utility bills to automatically charge your card each month.
- Don’t settle on paltry 1% cash back offers. There are some great credit card rewards to be had out there. Do some research online and find a rewards program that’s worth your time and money. Cardratings.com is a good place to start.
- Finally, limit yourself to just one or two rewards cards. Anymore than that starts to become difficult to keep track of and you could easily find yourself in debt or damaging your credit score.
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