While many credit card companies offer a plethora of rewards in order to lure people in, what many potential consumers do not realize is these rewards, in many cases, come with a higher interest rate.
Consumers debating on whether to have one or more cash back and/or rewards cards need to carefully consider whether these cards will realistically benefit them based on their financial objectives and personal spending habits. Consumers struggling with massive credit card debt, for example, should shy away from having too many rewards cards tempting them to spend even more. If you are someone who tends to carry a balance, savings from a lower interest rate card may exceed the value of any cash back or rewards connected with having too many cards
Those rewards cards with lower annual percentage rates (APRs) offer the rate based on an individual’s creditworthiness. However, many rewards cards have high penalty APRs that kick in after just one late or missed payment, with a good deal increasing by up to 10 percent or more. In fact, such penalty APR rates can range from 16 percent up to 30 percent and can even remain indefinitely.
The ideal holder of multiple rewards cards are those who can afford to pay their balance in full each month while utilizing such rewards to their fullest. For example, if you are someone who pays their balance in full each billing cycle and travels extensively, a card with rewards miles could put money in your pocket. If you drive a great deal, cards offering gas rewards could be very advantageous. Perhaps you do both, then it might behove you to carry multiple cards, all with the caveat, you do not carry a balance over each month.
Before applying for multiple rewards cards, consumers should inquire with the card issuer about how to earn and redeem the rewards, including what is considered an eligible purchase, whether rewards are available monthly or annually, and in the case of cash back, whether rewards go into a bank account or are put toward the next bill, and lastly if there are any limits on rewards. Cash back cards could be beneficial to those who shop frequently but could be extremely dangerous if not used correctly, especially if you have more than one. Consumers should take the time to read all terms and conditions to see if the card will actually benefit them. In most cases, multiple or even one cash back rewards card can encourage spending. It takes tremendous financial disciple to make multiple rewards cards worth their while.