Money Talks, So Should You

Rewards credit cards: To use or not to use

Brandon Lafving
by Brandon Lafving, Dimespring Contributor (@TechDragoon)

Max was one of those guys who could hang up a gas nozzle with one hand... while pulling out his wallet with the other. But that wasn't what impressed me about his gas station payment dance.

It was the ten or twelve credit cards he thoughtlessly sifted through before reaching the card he was looking for. Smooth, I thought, maybe I should fill out a few more applications. What kind of savings was he racking up?

READ: 10 creative strategies to curb credit card spending

A rewards credit card for every occasion

Rewards programs have never been more commonplace. Every airline has one. Every department store has one, and every major Internet retailer has its own way of pulling you into its web of delicious savings.

Too complicated? Try one of the new wave of smartphone applications for rewards, which will help you manage your fistful of credit. Then set up autopay through your bank, so that you do not need to worry about the billing hassle.

That's what Max did, and he made it look so easy. But I had to wonder if that kind of life is for everybody. We can't all be James Bond.

And there are potential side effects if you throw down a credit application at every one of your favorite stores. For starters, processing a credit application does take a nibble into your credit rating. If you were planning on applying for a car or home loan any time soon, then those applications could easily cancel out your savings with a worse interest rate.

READ: 3 smart strategies to improve your credit scores

The Bottom Line

If you tend to keep a balance on your credit, then the rewards question takes a backseat to the credit card's APR. A higher APR will eat into all the potential savings you might reap in juicy rewards deals.

For example, say you have a balance of $1,000 on a 12% APR, and $1,000 on a 24% APR card. Every month, the 12% APR will cost you $10 interest, and the 24% will cost another $10 on a monthly basis. At that point, the rewards program advantages of the 24% will be negated by the extra interest charge.

For everyone else, choose a strategy that seems effortless to you. We can't all be James Bond, and it's probably better that way. So be yourself and find a rewards card system that works for you.


Brandon D. Lafving is an independent writer with an interest in financial systems. A graduate of Princeton University, Brandon has published journalism in The Philadelphia Inquirer, Metro, and WXPN. He also consults, researches and writes reports for small and mid-size businesses.