postheadericon Pros and Cons of Credit Card Reward Programs

Reward programs motivate credit card usage. Credit cards are payment cards, you can use them for buying goods and other monetary activities based on the promise that you will pay the amount back according to the terms and conditions. There are many reward credit cards such as Amex Rose Gold for dining and supermarket purposes.

Although rewards might sound cool for every spending nevertheless, you should know the pros and cons of credit card reward programs.

Pros

Reward Programs

Reward programs are prosin themselves when it comes to rewarding credit cards. While shopping and dining, you can score points at every purchase, which can be combined and redeemed later for purchasing other items. The reward program acts as a motivator for spending money from the credit card and rewards you for using it.

Bonus Points

Many popular credit cards offer welcome bonuses. Welcome bonuses are points that are offered by the banks for encouraging spending and also, reward you substantially if you purchase something for a certain amount in the initial months of a new card.

Insurance

The benefit of insurance varies from card to card but almost all of them offer insurances on rental car services and travels. If you, for some reason such as delayed flights, illness, or other reasons are unable to make your trip, the banks will reimburse the amount. Something very complicated otherwise.

Purchase Protection

If you purchase something that you would like to return or you have seen the same item at a lower price, credit cards make it simple for carrying out sucha transaction by reimbursing the previous purchase. Returns are also easy under credit cards for items that have a manufacturer’s warranty.

Scam Protection

Even if you lose your credit card to someone and if that someone uses it for purchasing, your liability to pay back the amount is protected by law. Fraud protection is another benefit when it comes to rewarding credit cards.

Cons

Interest

Well, if you are to purchase something with a credit card, you have to pay interest on the outstanding amount according to the terms and conditions. Interests are higher when it comes to credit cards.

Credit Score

If you miss out or delay any payment, it can affect your credit score. One or two disruptions would not affect it dramatically but the report will be shown in your credit score, but a repeated trend will lower your chances of getting the best interest rates on loans.

Cash

Taking out cash from the credit card will come with extra charges and higher interest rates. It might seem tempting but you should stick to your debit card for cash unless it is an emergency.

Annual Fee

If the annual fee of your credit card is higher than the potential returns, then you should cancel the card altogether and if the gains are higher, annual fees are not big of an issue.

Reward Credit Cards are good for monthly requirements such as grocery shopping and other purchases.

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