Most people have a strong opinion about credit card rewards. Some renowned financial experts see credit card rewards as worthless and something that costs you money. Others see rewards as a way to save money. Credit card rewards can be worth it if you pay your credit card in full every month.
The Benefits of Credit Card Rewards
If you pay your credit card off in full every month, you avoid interest charges. The nice thing about the rewards is that you get money back when you purchase items on the credit card company’s list of eligible products. You don’t have to do anything extra. You just pay with your credit card.
Think about the following scenarios. You are getting 2% back on your groceries, gas, and other bills. You could theoretically take that money and save it in an account that earns you interest. However, if you do not pay your credit card off in full every month, the interest you are going to spend on your purchases is much more than any reward you receive.
The Other Side of the Credit Card Reward Argument
If you don’t pay interest on your card, credit card rewards are like someone handing you free money. Yet, some financial experts are not in favour of getting the rewards.
Many see rewards as incentivizing people to spend money they don’t have on things they don’t need. As any credit card owner knows, it is easy to overspend on a credit card and find yourself in debt. When you know that you will get points back, you may rationalize purchasing products you don’t need.
The counterargument could be made that you are faced with marketing designed to encourage you to spend more every day. But you have the final say on how much you spend. If you have a reasonable budget and keep track of your expenses, you will get the rewards of a credit card with no debt and no interest.
How Do Credit Card Rewards Work?
When discussing their credit card with cashback rewards, the financial experts at SoFi described it this way, “You will earn two reward points for every dollar spent on eligible purchases. If you elect to redeem points as cash, it is deposited into your SoFi Checking and Savings account.”
If your card has a 2% cashback reward and you make $1,000 in eligible purchases, you would earn $20. Many consumers love credit cards with cashback rewards. Cashback rewards are easy to understand and require little effort on the cardholder’s part.
Travel reward credit cards let you earn points and miles that can be redeemed when you travel. Some cards offer airline or hotel credits.
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If you have a good credit score and pay your balance in full each month, reward credit cards can be a good choice. They can help you save money for the future and give you deep discounts on your travel purchases.