If you will have a credit card with a excessive rate of interest, this is the worst mistake you might make.
Nearly 40% of cardholders with a rewards credit card carry a stability, in response to a brand new survey from the credit-card web site CompareCards.com. The web site surveyed greater than 1,000 individuals. And of those that don’t pay their payments in full, the typical stability they reported having was $2,547.
“Sometimes, rewards credit cards are pretty enticing and it’s easy to get sucked in,” stated Thomas Donaldson, a senior credit specialist for CompareCards. “If you end up carrying a balance or making a late payment, you end up getting hurt in the long run.”
Because rewards credit playing cards typically come with excessive rates of interest and typically even annual charges, any rewards cardholders earn may be “completely wiped out,” he stated. “There’s no point in getting 1.5% cash back if you’re paying 19% interest.” The average credit-card interest rate is 16.eight%.
And rewards playing cards together with Chase’s
Sapphire Reserve and American Express’s Platinum
have annual fees of $450 and $550, respectively — though additionally they come with beneficiant journey rewards.
More proof that some rewards card holders are trapped in a cycle: Some 32% stated they deliberate to make use of their rewards for paying off their debt, in accordance with CompareCards.com. Another 21% stated they might put their rewards in financial savings.
What’s worse, almost one-fifth of shoppers have let their credit card rewards expire, a 2017 research from TD Bank discovered. “Perhaps consumers aren’t as educated as they should be when it comes to crunching the numbers and creating a plan to get out of debt,” Donaldson stated.