Credit cards have been around for a good period of time. They offer you rewards for every dollar or so you spend on basic products which makes them very enticing and beneficial. Rewards you get from credit cards can come in form of bonuses, points and free miles. Some credit card companies will give you a major bonus when you first sign up for the card. The bad news is, you may end up messing your credit score or finances trying to earn points and rewards on your credits.
Here are some of the things that have potential to cost you more than you should spend.
Some people overspend so they can earn a signup bonus
Credit cards offer bonuses in form of miles and points to entice people to sign up for. The thing is, you need some few requirements to spend a certain amount of money within a given time to earn the reward. You can end up spending more than you should or even on things that you do not need. Also after all this effort, you can fail to meet the allotted time which is not rewarding.
Too much annual fee
Some of the best credit cards charge a minimum of 450 dollars for the annual costs. For travel or rewards credit card, there is a yearly fee required for maintenance. One might argue that Y the rewards and travel benefits you get are worth the annual fees, but they might not be worth it especially if you sign up for too many credit cards.
Chasing rewards leads to debt accumulation
Not everyone with a credit card pays back the balance entirely every month. For those who do not repay the loan in full, some of them are looking to gain rewards. They are subjected to up to 17 per cent interest rate which is much higher than the awards. Due to the high interest rates, the debt also increases every month. Instead of using credit cards to make purchases and you are unable to repay, it is advisable to use cash or debit cards.
Possibility of damaging your credit score
Depending on how you use your credit card, you can end up damaging your credit score. Signing up for many credit cards means that there will be investigations on your credit score. When the inquiry is hard, your credit score is likely to drop. When you are also unable to pay your credit bills or taking large balances beyond your credit limits you affect your FICO score negatively.
The annual fees is too much
Some of the best credit cards charge a minimum of 450 dollars for the annual costs. There is a yearly fee required to maintain a travel or rewards credit card. You might argue that the rewards and travel benefits you get are worth the annual fees, but they might not be worth it especially if you sign up for too many credit cards.
Failure to pay your balances can also leave in debt and with a bad credit score. Establish your spending limitation to avoid such consequences.