Are Credit Card Rewards Really Worth It?

Some argue that credit card rewards are akin to coupon clipping for the middle class. However, for the savvy consumer rewards can really be a pleasant surprise after many accrued months of payments and spending. At the end of the day, whether credit card rewards are "worth it", really depends on the person. If you are frugal, financially responsible and someone that is likely to keep track of your rewards, making use of the your credit to get more rewards is probably going to be worth your while. Heck it might even be something you actually enjoy doing and looking into.

Credit Card Transactions

However, with the way credit card transactions have been passed down to consumers in recent years, using credit cards where you can charged a merchant fee has lowered incentives for charging. Unfortunately, this is isn’t all too suprising since many costs find ways to get passed down to consumers and “the little guy”. In New York, many smaller merchants have begun passing merchant fees to consumers, so consumers can pay an approximately 4% surcharge on some goods/services. This commonly occurs in many deli's, sandwich shops, restaurants, coffee shops, etc., where the small business has to pass the cost on to the consumer because payment processing is not as cheap as it used to be.

Due to this change, sometimes it might not even worth using a credit card to pay for your bill! Why? Well if your credit card rewards are less than 4%, you're losing money on that transaction as opposed to just paying with cash.

Which Rewards Cards Are The Best?

In times of economic uncertainty, your best bet is going to be a good cashback rewards credit card. If we do enter a recession, cashback rewards are likely to best suited since you can use them as an alternative form of "cash". You aren't limited on how you can spend them and you don't need to wait until your next vacation like with airline points. Moreover, if we do enter a prolonged period of economic uncertainty, you might have less disposable income than you think. When disposable income is low, the first leisurely activity you will forego is likely to be a "vacation".

Credit Card Rewards

If you plan on using credit to rack up credit card rewards, you need to make sure you are paying off your balance at the end of every billing cycle! If you are not paying the bill in full at the end of each statement, you will fall out of the grace period and will pay interest on any charges you make. This is likely to outweigh any benefits you'd see from rewards, since interest payments will far exceed any rewards you accrue from the card. Your goal should always be to avoid interest payments at all costs.

Everyone loves a good coupon but the benefits of keeping track of them and utilizing them have certainly had a diminishing return over the years due to other associated costs being passed on down to consumers. Credit cards are still a great staple of the financial industry but it just means we need to be a little more mindful when we charge things to our cards.