Are Rewards Credit Cards Worth It?
Rewards credit cards offer perks like points and cash back, but they may come with fees and potential drawbacks. Understanding how these cards work can help you decide if they are a good fit for your financial habits.
How Rewards Credit Cards Work
These cards give you rewards each time you spend, which can include cash back, miles, or points. You can redeem these rewards for travel, statement credits, gift cards, or merchandise.
For example, if you earn 2% cash back and spend $1,500 per month, you'd earn $30 monthly or $360 annually. With a $95 yearly fee, your net reward would be $265.
This example helps evaluate whether the card's benefits are worth its costs.
Common Reward Structures
- Cash back on every purchase or specific categories
- Travel miles for flights and hotel stays
- Points that can be redeemed in multiple ways
Benefits and Considerations
Rewards cards can be profitable if used correctly, but their value decreases if you carry a balance and pay interest or if the reward program changes unexpectedly. Regularly redeeming rewards avoids losing value on accumulated points.
Rewards credit cards are best suited for individuals with strong credit and disciplined spending habits.
Choosing the right card requires weighing potential rewards against fees and personal financial behavior.
Author's summary: Rewards credit cards offer valuable perks, but their true benefit depends on fees, usage habits, and credit strength.