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Credit cards offer a world of benefits, from travel perks to cashback rewards. However, they often come with associated costs, particularly credit card fees. So, are the rewards worth these fees? In this post, we’ll explore the relationship between rewards and fees to help you make an informed decision about whether or not the benefits outweigh the costs.
Credit card rewards come in three primary forms: points, miles, and cashback. Each has unique perks, but they all serve the purpose of providing value for your spending. Here’s a quick breakdown:
When used correctly, credit card rewards can offer significant value. Many cards provide generous sign-up bonuses or special cashback rates. For example:
This adds up to $435 in cashback per year just by using a credit card strategically. However, this doesn’t include the credit card fees that can eat into your rewards.
Many rewards credit cards come with annual fees ranging from $95 to $695 or more. Take, for example, the Chase Sapphire Reserve, which has a $550 annual fee. While the card offers points for travel and dining, along with perks like lounge access, the fee can be substantial if you don’t take full advantage of the benefits.
Beyond the annual fee, interest rates are another cost to consider. Rewards cards often carry higher APRs, meaning if you carry a balance, the interest could offset any rewards earned. For instance, if you earn $500 in rewards but pay $600 in interest, you’re at a loss.
To determine if a rewards card is worth the fees, consider the following:
Let’s look at a typical travel card with a $95 annual fee and no foreign transaction fees:
Total rewards = $800, far exceeding the $95 annual fee.
To truly benefit from rewards without being hindered by credit card fees, here are some strategies:
The answer depends on how well you manage your spending and take advantage of rewards. For those who pay off their balance each month and use the card’s perks effectively, credit card rewards can more than offset the fees. However, if you carry a balance, the interest charges may outweigh the benefits.
In the end, understanding both the credit card rewards and the credit card fees is essential. By weighing the costs and benefits, you can make a decision that aligns with your financial goals and ensures that the perks far outweigh the fees.
Affiliate and Relationship Disclosure: Credit Mileage may receive compensation from affiliate links included in this post at no extra cost to you. This helps support our mission of providing quality financial education and resources. Additionally, Credit Mileage has a direct business relationship with eCreditAdvisor, which may be mentioned or linked in our content. Our opinions and recommendations remain our own, and we only promote products or services that we believe offer value to our readers. We currently do not have any credit card affiliate links on our website.
Editorial note: The views expressed in this article are solely those of the author and do not reflect the opinions of any bank, credit card company, airline, or hotel chain. None of these organizations have reviewed, approved, or endorsed the content in any way.
Legal and Financial Advice Disclosure: Credit Mileage is not a law firm, and this article is not intended to provide legal or financial advice. This information is meant purely for educational purposes. We strive to offer accurate and up-to-date information, but it is not a substitute for professional financial or legal advice. Always consult with a qualified attorney or financial advisor before making any decisions regarding your financial situation.
The Bank of America Travel Rewards credit card offers a straightforward approach to earning travel rewards with unlimited 1.5 points per dollar and no annual fee. Ideal for budget-conscious travelers, this card provides value through flexible redemption and zero foreign transaction fees.
Credit cards offer numerous benefits, including rewards and building credit, that can outweigh their costs if used responsibly. While avoiding them might seem like a way to stay out of debt, it can lead to missed savings and opportunities. This blog explores the hidden costs of not using credit cards and their potential advantages.
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At Credit Mileage, we believe smart credit management is one of the key cornerstones for sound personal finance. Using credit from an educated point of view so that you don’t accumulate debt while swiping to maximize and best utilize the points and rewards programs that different credit cards offer is at the heart of what Credit Mileage aims to educate consumers about.
That’s why we offer a wide array of educational and editorial content and credit card reviews so that you can choose the best card to achieve your goals, depending on which type of points/rewards programs you like.
When you apply for a credit card through our site and are approved, we may receive compensation from our partners, which can influence how and where certain products are featured.
Although we don’t include every credit card on the market, we thoroughly research and evaluate each card we feature. The content we produce is created without any input or oversight from credit card issuers, banks, or partners. For more details, please review our advertising policy and credit card evaluation framework.
