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Credit card rewards are fantastic. You can get gift cards, plane tickets, discounts, cash and all sorts of special treatment, just by making everyday purchases with a rewards card. You can rack up a lot of freebies and save tons of money.

That’s also why they can be dangerous. Spending disguises itself as saving, and you can quickly trick yourself into “saving” your way into debt.

Used responsibly, a rewards credit card can be a helpful addition to your financial toolbox. If you have great credit, you may qualify for some of the best rewards cards. Before you apply, you need to know a few of the risks.


All credit cards present the temptation to spend more than you should — unless you’ve maxed out your credit card, who’s going to stop you from using it? Don’t overlook the importance of willpower when it comes to using a credit card, especially one that rewards you for your purchases.

Every time you pull a rewards card out of your wallet, ask yourself, “Would I make this purchase if I wasn’t going to earn points (cash back, miles, etc.) from it?” If the answer is no, you probably shouldn’t complete the transaction. More important: If you can’t answer that question honestly and resist an unnecessary “deal,” a rewards card probably isn’t for you.

Don’t confuse overspending with debt — you may be able to pay your bill every month, but that doesn’t mean you’re using the credit card responsibly. Living within your means is more than avoiding debt; it’s also about using your money to achieve your financial goals.

High Interest Rates

People who carry a credit card balance shouldn’t use rewards cards, since such products often carry higher interest rates than other credit cards, and the rewards you earn can quickly become overshadowed by any interest charges you may pay on rolling balances. Therefore, it’s best to charge only what you can pay in full each month if you really want to make your rewards count. Also, check the terms of the credit card carefully: If you slip up and miss a payment on a rewards card, you could put your rewards at risk, in addition to having to pay more in interest.


Some of the best rewards cards carry an annual fee, so you’ll have to do a little math before signing up. If you have a rewards card with 1% cash back and a $100 annual fee, you’d have to spend more than $10,000 on the card each year to actually make money. Spending less means you’re paying to use a card that isn’t any more helpful than a no-frills credit card. If there’s an annual fee, make sure you’ll get a good return on your investment.

If you’re interested in getting a rewards card, we have a list of some of the best ones out there. Keep in mind you usually have to have great credit to qualify for a rewards card, and you definitely don’t want to apply for credit you can’t get (credit card applications result in a hard inquiry on your credit report, which will cause a small, temporary drop in your credit score). You can get an idea of where you stand before you apply by getting two free credit scores through a Credit.com account.

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