Rewards Cards vs. Debit Cards

In recent years, there has been a great debate concerning the pros & cons of rewards credit cards. While funneling all of your purchases through this type of credit card can earn substantial rewards, critics argue (and studies show) that consumer spending increases with credit card use. Even when the consumer pays off the card balance each month, a rewards credit card does introduce an additional level of complexity to your finances. Even so, the cost/benefit debate echoes through the financial world.

One of the effects of the recent financial crisis is stricter regulation on credit card companies. As a direct result, credit card companies are starting to decrease their rewards programs. ABCNews recently reported on this trend.

A few notes to take away from the video:

• 46% of Americans carry a balance on their credit card.
• Those with rewards cards spend nearly twice as much as those without them.
• 41% of rewards card holders never cash in their rewards.

Honestly, I bounce back & forth on this issue. Every couple of years, I will try to capitialize on the rewards card. I try it for a few months and then give up. For us, it simply isn’t worth the hassle.

In the end, the reason Credit card companies offer rewards cards is not to benefit the cardholders. Credit card companies offer them because it benifits the credit card company. Shocker, right? You may be the exception to the rule, but we can’t all be the exception. Most of the rewards card users are getting burned.