So many things can lure a person into wanting to have a new credit card. When a person chooses a credit card it can be just based on the battle of the best add. Many people enjoy the lure of the credit card rewards. There are so many different types of rewards offered like cash back, airline miles, even some offer you free iPads. The better the credit card rewards the better chance of swaying customers to your company. The more customers that a credit card company can have means more money in their pockets.
Too many times customers can be deceived by the credit companies reward promises. These reward promises can often times come with added problems. One of those problems is that the customers can also sometimes be charged additional fees that were not expressed up front. The Consumer Financial Protection Bureau has begun an investigation about credit card rewards and the companies offering them.
The Bad Parts of Rewards
For many consumers the rewards are the things that determine which credit card they plan to obtain. It is not just credit companies that are offering dazzling rewards, some of the banks are starting to prominently display the benefits of their credit cards. However, one thing that many people are learning is that the rewards are not always a positive thing. Those big paydays or the outrageous gifts do not always come through.
One of the most common rewards that are offered is low “introductory rates.” These low rates can be as reasonable as 12%. When looking at the fine print of these rewards you will see that, there are catches that no longer make it rewarding.
- Late payments can make is so that your interest rates are automatically increased.
- A problem can be that with a late fee you might be charged a penalty interest rate or penalty fees that can be as high as 29%.
- Introductory interest rates are most commonly available for a limited time, roughly 6 to 12 months. However, afterwards the rates can increase up to 25%.
- Extra costs can negatively counter balance out the savings that one will get from the rewards.
Most all of the rewards and penalties, do not apply to things like annual fees and other basic fees. Terms of service can sometimes be complicated however, when you add rewards the contracts can get more complicated.
In the future, there may be changes due to the investigation that is being conducted by the Consumer Financial Protection Bureau. However, until that time it can be important to know exactly how to protect yourself from the negative parts of credit card rewards. There are strategies that a person can utilize to protect themselves from the dangers with credit card companies.
- Do not get a credit card if you have no need for one. Rewards can be appealing and at times, they seem good enough for you to want to get the credit card. Never forget that in order to obtain those credit card rewards you will be borrowing money. Collecting credit cards can only cause trouble in the end. You can be tempted to use those cards frequently.
- Know what you are getting into. It is important to read the terms of service as well as any other details of the agreement. The details of the agreement can be the difference between a positive or negative experience. Do not forget to ask questions for anything that you are unsure of. Another thing that can help is doing the math, the math of how much you will be paying in the end.
- If you decide to believe in the hype of the credit card rewards then you will need to be sure to plan and manage. You might be able to plan vacations around how to use your perks. Try to remember to manage your card not just use your card.
- Carrying a balance can be dangerous. Accumulating interest can help to set your debt on a downward spiral. Making high interest payments can cancel out the credit card rewards. If you wish to take complete advantage of the credit card rewards, you will want to pay off your balance every month.
Credit is Debt
It is important to remember that credit is debt. If you begin to spend money that you don’t have than you will be taking on more and that can be destructive.
A step in the right direction is how the Consumer Financial Protection Bureau continues to study the credit card reward programs and their effects on consumers. You can protect your finances by following some of the tips from above. Following those tips, you will also be able to try to remove some of the lure of the rewards and the iPads that can convince an individual to sign up for the credit cards.