Categorized | Finance

Pros And Cons Of Reward Credit Cards

A reward credit card is one that will give you something back for what you spend. This can vary but is usually cash or loyalty points. These can seem really good, but it is worth considering the pros and cons first.


The rewards on the cards do vary and so it is worth considering whether they are useful to you. If they give cash back, then they are likely to be helpful but they may give air miles or loyalty points. Consider whether these are rewards that you will actually use. Lots of supermarket points may seem good but if you do not shop there then they will not be much use. Also work out what the cash value is of the reward. Point schemes tend to look good but when you calculate what it is in monetary terms it can often be very low. The same applies to the cash back as 1% may seem a lot, but actually is very little in cash terms.

Interest Rate

Often the interest rate on a cash back card is higher than that on a standard card. This means that you will end up paying more than you would on other types of credit card. It is therefore worth taking a look at the rates on different cards and deciding whether you think that it is worth it or not.


Credit cards always have fees if you go overdrawn or cannot pay the minimum balance. It can be worth taking a look at these as they may be higher on a reward credit card. They have to somehow get back the money that they are spending and so need to be more costly in some areas to cover that.


It is therefore important to do some calculations. Work out how much you spend on your credit card each month and how much reward you will get. Work out the reward in monetary terms. If you always pay back your balance in full then you will gain all of the rewards. However, if you leave an outstanding balance each month, then there will be interest to pay. You will need to calculate the cost of this and take off the value of the reward. Then you will need to do the same calculation for a card without rewards and see how that adds up. You need to work out which will be the cheapest for you.

Having rewards can be a tempting prospect and can seem very exciting. However, you need to make sure that you will actually be financially better off when you choose a reward card. Unless you pay off the full balance each month, you will need to calculate the costs of the card and compare to others to see whether you will save money. It will take some time and effort to do, but it is important not to get carried away with what the card is offering and make sure that it really will be of benefit to you.

About Author
Crystal is a Finance blogger who occasionally writes on business and finance, She religiously follows ratesupermarket to find out information on Ontario mortgage rates.