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June 19, 2006
Credit Rewards Vs. Interest Payments
My last 2 posting spoke about the awesome benefits of being a rewards cardholder however I realized that I neglected to mention to account for interest costs associated with your credit card.
Credit card rewards programs are really best suited for people who pay off the entire balance owing each month as the cost of interest can offset the earnings you achieve.
Before you drop your current credit card and apply for a rewards card check the interest rate you are getting versus the interest rate of the reward card. If there is a huge difference in interest and you carry a balance it may be cheaper for you to stick with the credit card you already have and pay for a vacation.
When comparing interest rates make sure you look at the ongoing rate and not the introductory rate. Almost every credit card will have a short term low interest rate, typically three to six months and after the introductory period the rate will increase significantly. It is the ongoing rate you need to concern yourself with as this will be what you will pay in just a few short months.
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