Credit card rewards are one of the single biggest factors associated with the application process, and many people make it a habit to check the reward programs prior to anything else when applying for a new card. However, it’s not the only factor that goes into the process. What’s important to understand, however, is that while there are many aspects of credit cards important to consumers, rewards are among the most important. They’re not always what they seem, thought. Consumers often misunderstand important aspects of this type of credit, and it can cause some issues that you may not want to deal with over the course of your card membership. We’ve gone through the reward programs of many credit cards and come up with a list of things that you might make you fall for a card even though they are absolutely incorrect. Here are the 10 biggest credit card reward myths.
Applying For Credit Cards Hurts Your Credit
There is a misconception out there that applying for credit is going to hurt your credit, but it’s not always the truth. Sometimes you can apply for credit and use just the rewards you’re given for the application without seeing a dent in your score. The issue lies in the fact that you apply for several cards in a short time span; that’s when your score is affected negatively.
The Credit Card Fine Print Doesn’t Matter
The fine print does matter; probably most of all. Don’t let a reward offer fool you into applying for a card that really is not worth your time. What does this mean? This means you need to read the fine print and find out whether or not that reward is worth it or if it’s not. Some cards don’t allow you to earn the rewards unless you spend a certain amount in a specific time frame, but people miss that and sign up for something they’re not going to get.
Credit Card Rewards are Sometimes Not What they Seem
If you read the fine print, the reward system is exactly what it seems. There is a misconception out there that all reward systems with credit card companies are not very easily understood and that they all mean something different. The truth is that they always mean exactly what they say. It’s just up to you to figure out what they mean by actually reading the information provided.
Cancelling Credit Cards is a Good Idea
So you applied for a card, got the rewards you needed for that free flight and now you want to cancel the card; excellent, right? WRONG. It’s far worse to cancel a card than it is to apply for one. When you cancel a card, you lower your credit. When you lower your credit, your outstanding balances look a lot bigger and can actually put you over that debt-to-income ratio.
Credit Card Reward Miles Aren’t Worth It
Miles are worth it. Many people misunderstand how these work and what they mean. They don’t understand that even if they can’t earn free flights because they don’t spend enough that they can earn other things. You can use miles for things like rental cars and even a discount on a flight. Even if you don’t have enough points for a full on flight somewhere, you can still get things free or for much less.
Credit Card Reward Points Aren’t Worth It
Credit card reward points are worth it. They are some of the most worth it items you will ever receive with a credit card. What do we mean? We mean that reward points can be redeemed for gift cards, free flights, hotel nights, rental cars, movie tickets, merchandise; they can be redeemed for just about anything and that makes them totally worth it.
Carrying a Credit Card Balance Doesn’t Matter
Carrying a balance makes it nearly impossible to earn credit card points. If you are the kind of person that does not pay off your card in full each month, rewards are probably not worth it to you. You have to spend money to earn points but if that’s going to put you in debt, it’s not worth it. You have to pay off the cards in full each month to get the full benefit of the points. In fact, some cards only give you half your rewards with the purchase of an item and the other half with the actual paying off of the balance.
The Credit Card Interest Rates Matters
Interest rates do not matter as much as you might think. You should not apply for a card for the rewards if you are not planning on paying off that card in full each month. This is when the interest rates do not matter. If you pay the balance in full each month, interest does not matter. It does not accrue and it doesn’t matter what the rate of the card is when you apply. However, if you know you have bad spending habits and bad bill paying habits, you should just avoid applying for the card as a whole.
The Credit Card Rewards Make it Worth It
The rewards that cards offer do not always make it worth it to have more debt. If you are a person who does not make enough money to spend what is required to make the rewards worth having the card for, you should not apply for it. Rewards are always worth it for those who pay off their cards in full each month, but not those who don’t. If you know you have bad spending habits, you shouldn’t assume that the rewards offered by a specific card are worth the debt you will incur to earn them.
Credit Card Rewards Give You Free Stuff
It is free stuff, but only if you do not spend frivolously to earn it. And sometimes it’s not all that free. For example, some cards offer free points and rewards, but they’re not actually ‘free’ since you have to spend a certain amount to earn them. For example, 10 free nights in a Hyatt hotel might seem like a great reason to sign up for a card, but it’s important to know that 10 nights will be in one of the least luxurious levels, and if you want to spend the night in a really luxurious Hyatt, you might get 2 free nights out of the points you’re getting. Additionally, you’ll have to spend several thousand dollars in a few months to earn those points, so sometimes it’s actually more expensive to pay for those ‘free’ nights than it is to just pay for a hotel room.
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