Don’t Go Into Debt For Credit Card Rewards. Seriously.

by Jason Unger

No one gets rich from credit card rewards.

We always recommend spending with a debit card (I literally just wrote about this), but I understand the appeal in using a credit card to get rewards … if you pay it off each month.

Unfortunately, it doesn’t look like most people are.

In fact, nearly 40% of people who use rewards credit cards carry a balance on them … essentially exchanging debt for these rewards. That’s according to a survey from

Here are some of the major findings from their research, which surveyed 1,051 Americans who have one or more rewards credit cards.

  • 39% of rewards cardholders carry a balance, with an average balance of $2,547
  • 32% said the top thing they planned to use their credit card rewards for was to pay down debt
  • 26% said they have 3 or more rewards credit cards

But wait — here’s the crazy thing.

Tracking Credit Card Rewards vs. Checking Accounts

More than 20% of those surveyed said that they keep better tabs on their rewards miles than the amount in their checking account.

This is dumb. Credit card rewards are not worth it., which presumably is in the business of promoting credit card usage, even thinks this is dumb. Here’s what they say about carrying the average balance of $2,547:

Even presuming that they have cards with a relatively low APR of 15.9%, that still amounts to $378 in interest payments every year. That’s the equivalent of 37,800 miles’ worth of rewards, assuming 100 miles have a redemption value of $1. Earning 37,800 miles would require a significant amount of spending — $18,900 on a card that earns two miles per dollar — and if you’re already carrying a balance, $18,900 of purchases throughout the year will likely add to that. In short, using rewards to retire debt is a losing proposition at these levels. And according to our survey, the most common use of rewards is, ironically, to retire debt.

Credit card companies want you to think that the rewards are a good enough reason to use their products … and you’ll inevitably spend more and likely carry a balance.

It’s not just their assumptions; it’s real science. And they win every time.

Photo by niu niu on Unsplash

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