Some credit cards are awesome for earning rewards like extra cash or free travel. If your money habits aren’t great, though, those cards can lead to consumer debt. Credit.com recommends mastering these three money habits before jumping into the credit card rewards game.
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First, you want to make sure you’re in the habit of paying balances off in full. If you’re accumulating interest, that kind of offsets the whole rewards thing. Second, you should have a solid credit score. This shows you’ve developed responsible habits, plus, it qualifies you for better rewards cards.
Finally, you want to make sure you’re good at sticking to your monthly budget. If you’re having trouble staying disciplined, you don’t want to play with fire. And if your finances are already stretched thin, you don’t want to get caught in a debt trap.
Of course, there’s a lot more to consider, but these three factors are a good general summary of using credit card rewards responsibly. For more detail, head to the full post at the link below.
3 Signs You’re Ready for a Rewards Credit Card [Credit.com]
Comments
4 responses to “Master These Money Habits Before You Start Using Credit Card Rewards”
The only way to win with credit card rewards is the sign up bonuses. I’ve flown to Europe return twice now just from sign up bonuses alone. A good friend of mine only flies First Class now using his points. Credit cards are only trouble when you’re spending money you dont have. Be smart and fly at the pointy end every time!
Especially if the card has an annual fee, which is sometimes waived on signup.
Yep and even then, there’s a card I’ve kept due to it’s excellent insurance policy and other perks normally has an annual fee but so far each year I call up to cancel they waive the fee. Also worth noting, I’ve never paid interest on any card I’ve ever owned. I simply don’t spend money I don’t have.
Treat the credit card as a debit card, when I was younger and not up to speed with how the cards work I used to make a purchase and go home and make the payment onto the card straight away so I knew it would be $0 balance. Now days I’m more aware and take advantage of the 55 days interest free etc.
I should also mention that I set calendar reminders approx 9 months after signing up to remind me to call the bank to cancel that card after ensuring I’ve received the signup points.
Some people think it’s all too hard to do this, but it’s a very small amount of work to enjoy potential $3000 – $4000+ flights. I say, enjoy the 20+hrs in economy otherwise.
You are usually better off with a Debit or Credit card that gives you a rebate of 1% on your purchases. There are two things you should work out:
1) how much is a point worth – look to see if there is an option to get a store gift card for a price on that. How much do you have to spend for a point and then you can work out how much you have to spend for dollar of reward.
2) From 1 above what is your annual fee and how many dollars do you have to spend to get rewards to pay for the annual fee. Most people would be hard pressed to break even.
matt0 above has the right idea!