Is it a Good Ideas to use Credit Card Rewards?

By: Melanie Dabb, Extension Assistant Professor

December 14, 2021

man holding phone and credit card

There are many credit card options out there that offer rewards. These can be in the form of cash back or points towards a specific item like travel or in a specific store. When used responsibly, these rewards can be a great tool to reduce costs on some of your big-ticket items. For example, if you like to travel, using a credit card for your regular every day purchases can save you money on an airplane ticket later on. 

There are some risks associated with using credit cards with rewards that are important to keep in mind. First it can be really easy to run up a balance on the card. If you don’t pay the card off each month you end up paying more in interest. You want to make sure you can pay the card of each month so you don’t end up paying for your rewards in interest! Something else to be aware of is many of these rewards programs charge fees and/or have specific program requirements. An example of this is when the card charges you an annual fee just to have the card. You will want to make sure the rewards you are getting are more than the fee to have the card. Be sure you understand all the fees and requirements associated with the rewards program and that it fits within your budget and goals. Some examples of this are points that expire if you don’t use them within a specific amount of time. You will want to make sure you can realistically use the rewards within the required time frame. 

To get the most mileage out of your reward card, use the card for the everyday expenses that you would be spending money on anyway. Consider treating your rewards card like your debit card where the amount you have access to is the amount in your budget for everyday expenses. This can also help keep you from running up a balance on your card. This way you will know you have the money to pay the card off at the end of the month. Another way to maximize your mileage on rewards cards is to pay attention to where you spend the most money and make sure you use your reward card on those purchases wherever possible, without leaving a balance on your card. 

Being smart and strategic with credit cards that offer rewards can pay off as long as you are aware of the risks and plan ahead to avoid them.