Those of us that use credit cards for every purchase are probably doing so with good reason. We are trying to earn as many credit card rewards as possible on our everyday spending. While some might have a goal to earn cash back, others are trying to earn enough points and miles to achieve a free vacation.
But when does it stop making sense to chase the high credit card rewards? Here are a few different reasons why is might not be in your best interest to go after a big reward with your credit card.
Failure to Pay Statement Balance Each Month
One of the worst things that you can do when using a credit card is to not pay off the statement balance each month. When you do that, you will start incurring finance charges that can potentially wipe out the value of any reward you have earned. If you find yourself carrying a balance during most months, then it might be a smart idea for you to look into a credit card that has a lower interest rate.
The Rewards Value Doesn't Make Sense
Does your family spend a large part of its budget on either groceries or gasoline purchases? If so, then it probably doesn't make a lot of sense to have a rewards card that offers bonus miles for travel related purchases. Instead, look for a card that will offer greater rewards for the purchases you do make on a regular basis.
You're Not Careful with Authorized Users
One nice feature with many reward cards is that they offer very attractive sign up bonuses. To sweeten the deal even more, there are some cards, like the Chase Sapphire Preferred card, that will also offer a bonus when you add an authorized user to your account and they make a purchase. If you decide to get one of these cards, make sure you are incredibly selective with whom you make an authorized user. The extra points are not worth your credit being hurt by having someone go on a shopping spree.
You Let Your Rewards Expire
The thought of letting your miles expire would make most people a little queasy. You work so hard to accumulate a large balance and the last thing you want is for it to be wiped away. Unfortunately that is exactly what can happen with a lot of hotel and airline rewards programs. If you do not earn or use any points, then your account is subject to closure for inactivity.
If you don't use your credit card very often, make sure you don't just stick the card in a drawer and forget about it. Find out when your points will expire and make sure that you use your card to extend the expiration date.
The Spending Requirement to Get the Sign Up Bonus is Too High
Almost all rewards cards require you to spend a specific amount over a period before they will award you with the sign up bonus. As the credit card bonuses gets more and more lucrative and as the ability to earn bonus points increases, the minimum spend amounts will also go up – sometimes to a level that would be uncomfortable for most people.
Before you make the decision to apply for a credit card, make sure that you are going to be able to meet the minimum spend. If you won't, then you need to think twice about the card that you want to apply for.