(NewsNation) — It’s the all-American temptation: Spend just a “few” more dollars with a credit card to rack up enough miles for that flight for that vacation to Miami or to visit mom in Des Moines.
But is the reward worth the cost? Are you better off just buying that airline ticket?
A new survey from Bankrate.com says: more than two-thirds of us try to maximize credit card rewards: airline miles, points or cash back. But, unless you’re paying your card balance every month, the reward isn’t worth the “investment.”
“Chasing rewards while you’re in debt is a big mistake,” says Bankrate Senior Industry Analyst Ted Rossman. “The average credit card rate is a record-high 20.755%. The typical rewards payout is in the one to five percent range. It doesn’t make sense.”
Rossman shares a real-dollar example: ‘If you finance a $1,000 purchase for 12 months at 20.75%, you’ll end up paying $115 in interest. And you’d only earn $10 in rewards with a 1% cash back card and $20 with a 2% cash back card.”
According to the Bankrate survey conducted in January, just over two in three of those Americans with credit card debt say they make an effort to maximize credit card rewards, with 27% making “every effort,” and 40% making “some effort.”
Also: Cardholders with no debt also chase rewards. Among cardholders who typically pay in full, 76% make an effort to maximize credit card rewards.
The lessons:
- Make and stuck to a credit card repayment plan
- Pick rewards that fit your lifestyle
- If you can pay off debt quickly, consider a 0% balance transfer card
- DO NOT spend beyond your means jus to “earn” rewards
The Bankrate.com survey, conducted online by YouGov Plc., sampled 2,239 adults, of whom 1,740 were credit cardholders.