How To Avoid Reward Credit Card Dangers

Having a reward credit card can be very exciting

, especially if the rewards at stake are big and attractive. Every year, thousands of people all over the world sign up for different credit cards that offer a diverse choice of reward programs. Each one of these reward credit cardholders hope to get more from their spending.

When used correctly, credit cards with rewards can truly be very rewarding. However, people cannot overlook the fact that there are risks associated with using reward credit cards. For those who are not conscious of their spending habits, having a reward credit card can lead to the trap of bad credit.

What are the dangers that you need to be aware of? More importantly, how can you use your rewards credit card in a way that is favourable for you? Listed below are the possible dangers along with tips on how cardholders can avoid them.

Not paying the full balance. Compared to regular credit cards, reward credit cards usually have much higher rates of interest and fees. This is why reward credit cardholders are strongly advised to pay their monthly balances in full to avoid the extra interest rate charges.

The Annual Percentage Rate (APR) on reward credit cards range from 15% to as much as 20% of higher, depending on the type of reward program. As can be expected, credit cards with bigger rewards tend to have more expensive rates than other reward credit cards.

If youre the type of a credit cardholder who always leaves an outstanding balance or submit only the minimum monthly due payment, you could end up spending more on APR charges rather than enjoy the rewards or incentives that your credit card offers.

Allowing yourself to get penalized. Why pay the additional penalty fees when you can completely eliminate such fees? Make sure that you are aware about the rules of using your credit card to avoid late fees, overdraft charges and other penalties. Take note that the points you earned can go to waste if you become disqualified from redeeming rewards as a result of violations.

Spending more than what you can afford just to get rewarded. To earn points more quickly, some reward credit cardholders give in to splurges or unplanned purchases. Unfortunately, charging expenses to your credit card without considering your payment obligations can easily put you in a serious debt problem. As you struggle with your payments, your debt can quickly build up due to the interest rate and finance charges imposed by your reward credit card. Before spending with your reward credit card, make sure that you can pay it back on time.

Not understanding the fine print. A lot of cardholders make the mistake of signing up without reviewing the fine print. Keep in mind that the only way you can accurately compare reward credit cards is by checking the Terms and Conditions. No matter how exciting the rewards seem to be, step back and check the rules before making a commitment.

by: Ashley Jane Summers

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