Credit Card Debt and Rewards Programs

July 18, 2010 – 3:57 am

Paying off credit card debt could result in you being bombarded with new credit card offers. Some credit card companies have increased marketing efforts for their cards or introduced new rewards programs or other incentives. Discover Financial Services, for example, recently said marketing expense for the third quarter is going to be at the highest level since the third period of 2008.

Stick with Debt Reduction Plan

Think long and hard before accepting new offers from credit card companies. While it may seem like a good idea to sign up for cash back or other rewards offers, these programs usually come with a price. Here are three reasons taking advantage of rewards programs could derail your debt reduction plan:

Credit card rewards programs often have higher interest rates than non-rewards cards. Higher interest can cause your credit card debt to creep upward before you even realize it. If you are carrying a balance on credit cards it’s important to shop around for a lower interest rate.
You may be tempted to run up credit card debt just to accumulate points. Many rewards programs offer one point for each dollar spent and may have other special offers that boost points totals.
Points usually expire after a period of time. It’s important to regularly check your points balance to make sure you don’t miss out on using them. If your rewards program allows you to get cash back or pay down the balance with points, take advantage of the offer.

Review Rewards Terms

The wrong credit card rewards program could slow down your debt reduction plans, so read through all the terms before signing up.

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