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The Thrill of the Chase

July 25, 2024

Why chasing credit card rewards may not be a good idea.

Credit card rewards are great, but only if you use them wisely.

If you’re deep in debt but still chasing points, it’s not an optimal financial move. Yet many Americans are doing just that. Let’s discuss credit card rewards and why they aren’t always the best thing.

Credit Card Debt Report

According to a recent report, about 66 percent of Americans are in credit card debt yet still chasing rewards.

The reason this is not optimal is because the interest on most credit cards essentially wipes away the rewards’ value.

  • The average interest rate on credit cards hit 22 percent at the end of 2023.
  • Meanwhile, the average card rewards percentage remains between 1 and 5 percent.

Paying a 22 percent interest rate to get three percent cash back, is a losing strategy. Also, if you think getting airline miles is worth taking on revolving debt, think again.

Note: According to one report, the average airline mile is worth about two cents.

Credit Card Rewards Can Be Good 

This doesn’t mean that you shouldn’t use credit card rewards. You absolutely should. However, you want to make sure that your card fits your financial habits so that you’re simply using the rewards, not chasing them.

If you have credit card debt, make a plan to pay down that debt and ignore the rewards until you have a zero balance. Then, review the card’s terms and benefits to make sure it’s a good fit. 

Do One Thing: Don’t spend money on credit cards just to earn the rewards unless your debt is manageable. Paying high-interest rates just to get rewards is typically not worth it.

This article was originally posted on savvymoney.com

 

The material provided on this page is for informational use only and is not intended for financial, tax or investment advice. VisionBank, PurposeBank and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

 

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