Is Your Rewards Credit Card Costing You Big Bucks?

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

If you don’t want your so-called rewards credit card to cost you money, be sure to consider the following before signing up for your next card.

A few months back, you signed up for this brand spanking new shiny piece of plastic that was supposed to give you a ton of benefits simply by using it responsibly. But somehow, it has ended up putting a dent in your wallet, and you can’t seem to figure out why.

Unfortunately, this is all too familiar, as people sign up for rewards credit cards without understanding how they actually work or failing to evaluate whether the costs will outweigh the benefits.

Sound familiar?

If you don’t want to fall victim to this trap, be sure to consider the following before signing up for your next rewards credit card:

Annual fee

Because your card will more than likely be accompanied by an annual fee, it is wise to determine if you will be able to accumulate enough rewards to absorb the cost.

You should expect to pay some sort of fee for the incentives you will be receiving. However, you may be able to find a card with no annual fee for the first year, or even negotiate with the creditor to have it waived.

Also, bear in mind that if you obtain a card solely for the signing bonus, you’d better make sure it has something to offer once the introductory period has lapsed, as the annual fee will not be going away any time soon.


Many creditors offer discounts through both affiliated and nonaffiliated retailers. For example, when Discover cardholders make purchases through the ShopDiscover online marketplace, they are eligible to earn cash-back bonuses between 5 percent and 20 percent on select purchases. The MasterCard MarketPlace offers a wide range of discounts on items purchased through its site from a number of retailers.

Saving money can be very beneficial, but only if you have adequate cash on hand to cover the items you would like to purchase. If you plan to finance the purchase, you’ll be paying interest on the debt.

Hidden restrictions

Not all rewards programs are created equal. In fact, many have restrictions that limit the amount of points, miles or cash back you can receive.

On the other hand, you may have to meet a minimum spending limit associated with an introductory offer to receive the full benefit. Also, select benefits may not be eligible for rollover and may expire if not redeemed within a certain period of time.

Blackout dates are also common among airline miles programs, and some creditors will forfeit any balance you have accumulated if you miss a payment or close your account.

Rotating categories

Creditors often use a tiered system to calculate the amount of awards you can accrue on an annual basis, which is based on distinct categories such as food, travel and gasoline expenditures. However, these percentages may change quarterly, and if you do not stay abreast of the changes, you can easily miscalculate your earnings or miss out on increasing your rewards.

Other costs

There are miscellaneous costs associated with rewards credit cards that you should be mindful of or they could end up costing you big time. These include, but are not limited to, dormancy, paper statement and late-payment fees. If you accumulate a $35 fee as a result of a late payment and your standard annual fee is $150, that certainly reduces and potentially eliminates or exceeds the value of any rewards you’ve earned.

Annual percentage rate

It’s essential that you avoid carrying a balance on a rewards credit card. The interest rate on rewards cards is generally higher than on other credit cards, and your interest payments can quickly outpace the benefits.


What good is an airline travel card if you fear flying? The point I’m trying to make is simple: If the rewards offered by the card are lucrative but do not appeal to your interests, you will probably end up paying an annual fee without realizing any benefits.

Rewards credit cards can definitely be worth the perks if evaluated properly beforehand and used responsibly, but there’s no point in having them if they will never leave your wallet.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,094 more deals!