One reason that many people say they use credit cards is because of the cash back or rewards features. Some refer to this as the cash back game. But, is it really a good idea for you?
CASH BACK REWARDS DANGERS
Because this is a very dangerous game to play, I think that it’s important that you understand the dangers before anything else associated with these cards. So, lets get right to it…
Danger #1 – Not Keeping Track Of Your Balance
With goals of earning the most cash back possible, many people swipe, swipe and swipe some more. The problem with this is they aren’t keeping track of how much money is actually being spent with each swipe. When it comes time to pay back the money, they cannot pay in full. Because the account can’t be paid in full, these consumers end up paying tons of money in interest through the process of slowly paying the balances off.
Danger #2 – Most Cash Back Credit Cards Come With High Rates
When it comes to credit cards, interest rates will be the highest fee you find yourself paying in most cases. Unfortunately, because of the added benefits associated with cash back cards, there are often higher interest rates and annual fees associated with them too. While applying for these cards, high amounts of cash back often change views on interest rates and annual fees leading consumers to agree to pay more money than they should.
Danger #3 – Humans Are Competitive
As human beings, we are naturally competitive creatures. This instinct is even noted in cave drawings of competitive games played since before general record keeping practices came into place. That being said, because we are competitive creatures, we often look at points as a great thing. The more points we earn, the more cash back we get. So, some people make a game of the process. They want to earn more points than they did last month. Unfortunately, each one of these points is earned through purchases and the creation of debt. Forgetting that can become a very costly mistake.
IS IT EVER OK TO USE CREDIT CARDS?
Absolutely! As a matter of fact, I’m an advocate of these accounts if, and only if, they are used properly. The reality is, as with any product, these cards were designed for a specific reason. They are here to help consumers. The only problem is that they are often abused.
So, the only time using cash back credit cards should cross your mind is when you are sure you can pay off your balance within the grace period. That way, you don’t find yourself paying astonishingly high interest rates! Also, before using these credit cards, make sure to do a good comparison to avoid high annual fees and other fees that may be charged!