There are many rewards that come with using credit cards responsibly. With rewards cards, you can rack up points to earn free travel, gift cards, and even cash. On the surface, using credit cards to pay your bills looks like a great idea. Why not get paid to buy what you’re going to buy anyway?
The problem is that while taking advantage of credit card rewards is completely possible, it’s not the best choice for everyone.
If you’re thinking of using credit cards to take advantage of rewards programs, here are three warnings signs you shouldn’t.
1. You Don’t Pay Your Bill in Full
Responsible use of credit cards equates to paying your bill in full each month. If you want to use your credit card to earn points or air miles, but don’t pay your bill in full each month, you’ll be charged interest. Paying that interest will completely wipe out the value of any points you’ve accumulated.
This makes the whole cycle pointless. And, even worse: if you don’t pay off your bill monthly, you could rack up a huge amount of debt.
2. You Spend More with Credit Cards
If you’re anything like me, swiping a credit card feels much less painful than swiping a debit card. With a debit card, you know money is coming out of your bank account — therefore lowering your balance. Not a good feeling.
With a credit card, you don’t have to worry about any immediate repercussions. You spend a little extra, because you know (or think) that you’ll pay off the balance at the end of the month.
Even if you do pay off the balance at the end of the month, you’re still buying extra stuff that you wouldn’t have purchased under normal circumstances. The extra money you spent probably cancelled out any rewards you have to gain.
3. You Already Have Credit Card Debt
If you’ve already got a mountain of credit card debt, you definitely shouldn’t be trying to game the credit card companies.
Even if you’re on a committed debt payoff plan, you shouldn’t try this. Everyone experiences moments of weakness when attempting to pay back debt; the last thing you need is to go on an impulse spending spree.
Credit cards aren’t evil. If used responsibly and paid in full each month, they can be very valuable. I know several people who earn enough points to score an almost free vacation each year. While this sounds alluring, credit card reward programs simply aren’t meant for everyone.
If any of these three warning signs are present, you should stick to cash or debit cards for your purchases. Credit card rewards aren’t worth going into debt for.
Do you use credit cards rewards programs? Why or why not?