Money Matters: Should you drop your rewards card?

February 3, 2017 01:30

Sponsored by NEFE

The average household carries nearly 6000 dollars in credit card debt. Simple strategies like paying off more than the minimum balance and improving your credit score to qualify for lower interest rates can help, as can using low- or no-interest balance transfer offers, which allow you to pay down the principal at a lower cost. But financial experts say there may be another tactic: Ditching your rewards card. Why? Depending on your balance and your interest rate, your "rewards" can quickly get eaten up by the cost of higher rates.

As Consumer Reports explains, cash-back and other rewards cards usually carry a higher interest rate than non-rewards cards. Any interest you pay on balances each month can chip away at those rewards, or eliminate them completely. They suggest looking for cards with lower rates, improving your credit score to qualify for better rates, weighing the interest payments against the rewards on a monthly basis, and even calling the card issuer to ask for a lower rate. Few call, but many who do are successful.

To help your viewers/readers/listeners get up to speed on credit card rewards and interest, talk with credit counselors in your community, and compare bank-issued credit cards in your market. The differences can be significant and making the right choice could save hundreds or even thousands of dollars as balances are paid off.

Sponsored by the National Endowment for Financial Education
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