Many people see credit card points as rewards, but are they really? It could be that they are actually costing you unnecessary money. Points are very popular promotions offered by virtually every single credit card company on the planet, and they usually allow customers to get free stuff. This could come in the form of travel rewards or material items, such as a tickets, gifts, products, etc. However, sometimes these card points aren’t all that they are cracked up to be – especially when they end up costing you money instead of rewarding you.
You’ll Have to Spend More Money!
One of the clearest ways in which your credit card points are costing you instead of rewarding you is by the fact that you’ll have to spend more money. Some banks and credit unions are requiring their cardholders to spend more per month than ever before in the past, if they want to actually make use of these rewards. For instance, if you only were required to spend $2000 in the first three months, you’ll now have to spend $3000 to get the same points and rewards. This might not be a problem for the select few who already spend a lot of money every month with their cards, but for many, it’ll just prompt them to spend more than they want.
Interest Rates Have a Neutralizing Effect on Points
Even if customers do intend to spend more in order to take advantage of points or rewards, it might not be worth it due to the fact that interest rates are so high already. Interest rates for points or rewards cards are anywhere between approximately 10 percent and 24 percent, which is quite high to say the least. If you carry a balance on your credit card, you’ll incur these interest rates, and that will basically neutralize the value of what you get in points or rewards. Experts agree that this is another way in which credit card points just cost you more money.
It Can Lead to Impulse Buying
Experts say that you should avoid impulse buying at all costs. Impulse buying is spending money on your credit card just to get more points and bring you closer to that reward or perk you’ve been promised after accruing a certain number of points. This can obviously lead to a situation where the consumer almost views the points or rewards program as a game of sorts. As a result, you’ll be spending more just for the sake of getting more points, which can cost you unnecessarily every month.
Credit card companies relentlessly market points as rewards and perks, but the real truth is a bit more complicated. For people who are able to exercise good discipline and self-control, points and rewards are absolutely a good thing because they give people something in return for all that spending. However, for people who don’t have to or want to spend as much per month, it may not be worth it. People with poor self-control may also get in over their heads.