The case against rewards credit cards

Earlier this week, The Washington Post published a blog post by Natalie McNeal. You may have heard of her. Shes made something of a career out of first accumulating and then repaying $20,000 in credit card debt. Shes written a book, and has her own website. Excuse your blogger while he tamps down his envy, and composes himself.

Rewards credit cards bad?

Thats better. Anyway, the overall thrust of McNeals blog was that she was (on balance and with caveats) against rewards credit cards in general and travel rewards cards in particular. And she gave three reasons why:

  1. Having had so much credit card debt before, she was determined to avoid it again. And using plastic for most purchases, rather than just exceptional ones as she does now, would mean that shed have to micro-manage her cards so as to be sure she retained control.
  2. Most travel rewards cards come with fees, and McNeal objects to those on principle.
  3. Credit card interest rates on rewards plastic tend to be higher than those on non-rewards cards.

All of those are good points. If youre going to use your rewards credit cards for most of your purchases, you really need to keep on top of managing your payments and expenditure. Everyone hates annual fees. And, on average, credit card interest rates are higher for rewards cards than others.

Rewards credit cards good?

However, only some people need to be concerned about McNeals points. Many have no difficulty in successfully managing their spending and payments. Quite a few are happy to pay a fee because they find the rewards they earn significantly outweigh it. And, as this blog regularly advises, rewards cards should ideally be used only for those transactions that are going to be cleared at the end of the then-current billing cycle; anything else should be charged to low interest credit cards.

You have to admire McNeal, and her counsel is spot-on for those, like her, who have a tendency to get carried away with their plastic. But, luckily, most of us arent in that position. For us, following such advice is about as sensible as asking a recovering alcoholic to recommend a good wine.

Finding the best travel credit card

Earlier this month, Rachel Koning Beals wrote a good piece on travel rewards cards for Business Insider. Beals is clearly an informed and insightful writer, not least because she referenced IndexCreditCards.com in her article. But enough mutual backscratching. The important thing is that she mentioned a key (perhaps thekey) rule abut selecting travel rewards cards:

But long before consumers pack their flip-flops and board the dog, they should review the terms, fees, and interest rates attached to travel credit cards (and all cards with rewards programs), which can vary greatly.

Recently, this news blog reported that, despite growing customer satisfaction with card rewards in general, travel rewards continued to cause resentment. In particular many consumers reported problems with blackout dates and difficulties making last-minute bookings.

So take care when choosing your rewards cards. Find one that suits your lifestyle by comparing the best credit card deals, and then read the small print. Its worth the effort in the long run.

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