Credit cards are a popular financial safety cushion in today’s society, and if you’re looking to get one, there are many different types to choose from.
From low interest credit cards to Oyster travel credit cards, there’s certainly a piece of plastic for everyone, however one option that keeps cropping up is the reward credit card.
These types of credit cards are very popular as they offer customers bonuses for using their service, for example, points that can be used on a variety of different items.
These windfalls may look great on the outside, but if you look a little deeper, there are a few pitfalls that you might want to be wary of!
What’s Your Credit Score?
Reward credit cards, no matter how often they’re advertised, are only offered to the top tier of credit holders – basically the people who have a flawless credit record.
It’s highly unlikely that you will be offered a reward credit card if you have some black spots against your name, and even applying for one can reduce your credit rating. Reward cards are only targeted at the consumers who have their finances in order!
Reward credit cards usually catch the eye as they’re known for offering some great deals, but another thing you should take notice of is the interest rates that are attached to them.
These type of cards most certainly carry higher interest rates than credit cards that don’t offer rewards, which means you’re actually paying the price for all the perks you have access to!
Interest isn’t a big deal if you’re paying off your balance at the end of every month, however if you’re like most people who carry balances forward over the months, interest will start to eat into your finances. Furthermore, these high interest rates can start to spiral out of control if you only pay back the minimum on the card!
Making late payments or skipping payments altogether is not the best idea when it comes to reward credit cards. Not only will you be subjected to fees and charges, but the credit card company can also remove the rewards on the card, leaving you with just a very high interest credit card.
Some customers who have missed payments have reported increased interest fees as much as 23 per cent, and you may also lose all the points you’ve collected on your card too!
Check the Fine Print
Blinded by the rewards offered by these types of credit cards, many customers don’t actually know what rewards they’re entitled too, let alone the terms and conditions of their contract.
Before you sign for your credit card, make sure you check the small print above all else. Some credit card companies will look to catch-out customers will high interest rates, penalties and fixed fees if you don’t pay your balance on time, so make sure you understand the terms and conditions of your contract before you enter into any agreements!
Post written by Tony, a personal finance blogger based in the UK for SO Switch.