Do you know everything about Credit Card Rewards? Let’s find out.
Being able to finally buy your favourite gadget after all the hard work feels like a great achievement, doesn’t it? What’s the hard work involved? Patiently waiting for the launch, applying for a Credit Card (if you don’t have one already), waiting for the gadget to come to your city, waiting in that long queue. That’s quite a task. And you thought choosing the right gadget was the difficult part here.
Once you successfully race through all the above mentioned steps, you reach the final level. The level where you actually get to hold that gadget of your dreams in your hands! That’s when you realise that dreams do come true. What could possibly be better than this feeling? No, ‘nothing’ is not the right answer. Getting rewards with your Credit Card is what we’re talking about. Only one thing can make you happier than holding that gadget in your hands—the reward points!
Think about it. After swiping your Credit Card to make some of your dreams come true, the feeling of getting rewarded is like getting another scoop of your favourite ice cream (for free). Since we all love rewards, we often keep hunting for them in every way possible. Be it while purchasing that brand new TV, while choosing a Credit Card or while ordering food from your favourite bakery (you always expect a free brownie or their famous cupcake as a loyalty reward, don’t you?).
Additional Reading: 10 Myths About Credit Score And Credit Report
With people going cashless everywhere, the demand for Credit Cards is only rising by the day. They surely simplify our life in multiple ways. Here are some:
Bye bye, bundles of cash!
With a Credit Card in your pocket, you no longer need to worry about carrying bundles of cash everywhere. Most shops, grocery stores and your favourite brands accept your plastic mate worldwide. Instead of stepping out with a bulky wallet every time, you can just carry your plastic buddy. It significantly reduces the chances of losing money (as an added bonus).
No more messed up accounts
The primary reason most of us fail to save enough is that we’re bad at keeping a record of all our purchases. No matter how much we earn, unless we keep a track of the cash inflow and outflow, it’s impossible to plan well. With Credit Cards, you don’t really need to worry about penning every expense down. Credit Card statements simplify your life and let you plan your money better.
A financial emergency? Credit Card to the rescue
In case of a financial emergency, you don’t need to rely on other people/methods. With your plastic soulmate by your side, there’s nothing more you need to get over this tough phase. Some comfort food maybe, but that’s it. Instead of borrowing money from people and feeling embarrassed about it all the time, it’s better to rely on your Credit Card.
Additional Reading: Are You Prepared For a Financial Emergency?
It helps build positive credit
Another advantage of getting a Credit Card and paying the bills on time is that you get to build a positive credit history. How does that help? A good credit history makes it easier for you to apply for loans in future. Since it reflects your ability to pay back on time, banks see you as a safe and reliable option.
Purchase protection. Yes, you get it.
Buying something using your Credit Card is better than using cash. Why? Because most of the leading Credit Card companies offer purchase protection. Don’t get confused. It simply means that if you get a defective product by mistake and the merchant refuses to exchange it, your Credit Card company can step in and handle things for you. Quite cool, isn’t it?
Balance surfing. Yes, you get that too.
Apart from getting to avail low introductory interest rates, most Credit Card companies also let you transfer your balances to low-rate cards. Balance surfing proves to be a good decision when you want to close unnecessary high-interest cards and move to the more economical options.
Rewards! Need we say more?
The most enjoyable part about owning a Credit Card is getting to avail all those rewards and benefits. Even if you’re one of those few who don’t like to show how much they love rewards, you know you secretly love it, don’t you? There’s nothing bad with wanting more reward points. You get to avail a variety of rewards like frequent flier miles, other discounts on electronics etc.
Like every other great thing, Credit Cards have some disadvantages as well. Sometimes we might be too blinded by the shimmering offers to realise it, but managing that plastic mate could be slightly tricky. Don’t worry! If you’ve chosen the one that’s right for you, you won’t face this issue. Here are some disadvantages you must know about:
Credit Card overuse means deep trouble
Overusing and overexploiting your plastic mate could mean a lot of deep trouble. It could drown you in a sea of debt, and that’s not good! Apart from making you drown in debt, it also makes you a compulsive shopper. You lose the track of all those monthly budgets and keep spending on unnecessary things. While it’s good to have the option to buy whatever you want, whenever you want, you also need to know when to hit the brakes.
Additional Reading: Shopping With A Credit Card Has Benefits!
Say hello to hidden costs
If you think that the only thing you need to worry about is the interest rate of your Credit Card, you’re wrong! If you fail to pay the bills on time, you’ll be charged a late fee. Not just that, if you use your Credit Card to withdraw money from the ATM, you’ll be charged a fee. You won’t want that, right?
Additional Reading: ATM Usage And You
Wrong card? Uh-oh!
The only thing worse than not having a Credit Card is getting a wrong Credit Card. Getting the right plastic mate is one of the most crucial things you need to keep in mind. In case you mess up and get a card that doesn’t suit your needs, you could end up paying more! Careful selection of your plastic mate is hence, quite essential.
Additional Reading: How To Choose The Best Credit Card For You
Now that you have a fair idea about the advantages and disadvantages of Credit Cards, it’s easier to debunk all the myths related to Credit Cards and their rewards as well. After analysing the positives and negatives of getting a plastic friend, we’re sure you still want to apply for one. After all, you can avoid all the negatives by choosing your card wisely and then using it efficiently. Let’s debunk some of the most common myths related to Credit Cards and their reward points now.
Myth: ‘Getting a Credit Card affects my Credit Score.’
Although your Credit Score does reflect the record of how many cards you’ve applied for, it’s wrong to say that applying for a Credit Card can affect your Credit Score. New credit enquiries don’t have much of an impact. But that doesn’t mean that you can go all out and keep applying for new Credit Cards every month. Excess of everything is bad. Let’s just remember that, okay?
Myth: ‘Credit Card balance doesn’t bother me. I can still earn rewards.’
Wrong! If you think that you can earn rewards while carrying a Credit Card balance, it’s time to get a fact check. Rewards might be the most fascinating part of getting a Credit Card. Well, maybe second most fascinating. The first being the feeling of finally getting to buy your favourite things. Paying only the minimum amount every month isn’t good enough. You need to keep up and ensure that all your bills are paid on time. We know you get to earn rewards by making a minimum payment on your Credit Card. What you don’t know is that you’re actually paying more interest than what you’re earning as reward points. That doesn’t sound too nice, does it?
Myth: ‘Cancelling an unused Credit Card helps improve my Credit Score.’
If you think that cancelling all your unused Credit Cards is the only way to improve that Credit Score, you’re wrong! Instead of cancelling all those cards, you could also try not using the card. You could still keep the accounts open. That’s better, isn’t it? After all, your Credit Score depends merely on how much of that credit you’re actually using. If your cards are unused, that clearly means that you’re not using any credit. Hence, without closing all those extra cards, you could still improve your Credit Score.
Myth: ‘Those points and miles don’t make any difference.’
Woah! Think again. All those frequent flier miles and other benefits that you earn as rewards upon using your Credit Cards and paying the bills on time definitely make a difference. You must have heard the saying—‘drop by drop, you break the rock.’ The exact same logic applies here. All those miles might look too tiny to be rewarding, but if you keep making all your bill payments on time, they could pile on into a better number. Try it out for yourself. You will thank us later!
Myth: ‘I can get a Credit Card just to avail those sign-up bonuses.’
Well, you definitely can apply for a Credit Card and expect to get some attractive sign-up bonuses. But getting a plastic buddy just because you want to avail these introductory offers doesn’t make sense. No matter how tempting those offers look like, you need to evaluate the bigger picture and see if this card will make sense in the longer run. Once you’re absolutely sure that getting this Credit Card now won’t make you regret later, go ahead and get it. Many of us get Credit Cards, exploit all the introductory offers and stop using them. To be more technical, this is called Credit Card churning. Although it sounds pretty attractive, it’s not a great idea! It can hurt your Credit Score in the long run. So better be careful now than regret it later, right?
Myth: ‘A lower Credit limit is the solution to all my problems.’
Many people think that lowering the credit limit is the solution to all their financial troubles. Well, it could help control your urge to shop unnecessarily. But when it comes to improving your Credit Score, it doesn’t really work. Having a higher credit limit and using it carefully so that you have enough credit available is more likely to help your Credit Score. So better work on those urges to shop more rather than getting your credit limit reduced.
Myth: ‘I can easily redeem my Credit Card rewards.’
Redeeming all your Credit Card rewards might not be as easy as the Credit Card salesman made it sound that day. Especially when it comes to redeeming all those flier miles, you really need to be flexible about your travel timings and dates. Sometimes, it could also mean multiple layovers and ‘not-so-great’ flight timings. But if you really want to redeem all those points, you’ll have to compromise a bit!
Myth: ‘Encashing those reward points can hurt my Credit Score.’
This is one of the biggest myths about Credit Card reward points. There sure are a couple of things that can hurt your Credit Score, like a bad payment history, huge debts, multiple inquiries in a short span of time, a bad credit utilisation ratio. But encashing those reward points is definitely not a part of this list. Just keep making all those Credit Card payments on time and you’re all set.
Myth: ‘I’m the one actually paying for those rewards.’
No. You’re not the one paying for those miles or rewards. Take that burden off your chest. We know you’re used to the fact that good things don’t generally come for free. But things are a bit different in this case. The only thing you’re required to do to actually get those reward points (for free) is—pay your bills in full and on time. If you keep carrying a balance all the time, you could be inviting trouble.
Myth: ‘Credit Card rewards will sponsor my next travel plan.’
If you have enough airline miles, that might help sponsor your flight tickets. But that’s not what travel is all about, right? There are a couple of other (significant) expenses involved. Your accommodation, fuel surcharges etc. are not a part of those rewards. These rewards definitely make your travel cheaper, but not completely free.
Not that all your myths related to Credit Card rewards have been busted, you just need to think about one thing—making the most of your Credit Card rewards. You can get it right if you get the right Credit Card. So, before letting attractive offers lure you into opting for unnecessary cards, think your decisions through.
Additional Reading: Credit Card Chronicle – A Look Back
Need more help selecting the best plastic mate? We’ve got you covered!
And while you’re at it, be sure to check out our Ten-10-a-Ten offers on both Credit Cards and Personal Loans. This offer is available only from Oct 4th to Oct 13th, 2018. So hurry!!!