How to use your reward credit card to your advantage and avoid debt

30 July 2013 - Which Wayt To Pay

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How reward credit cards work?

The idea is very simple, if you spend on one of these reward cards you earn reward in the form of points or cash back. Do it right and you could earn yourself $100s or even $1000s a year in the form of points, goodies or even cash. Be careful though, there are a couple of things you need to watch out for.

Things to remember when you make a purchase on a reward credit card

One of the reasons cards give rewards is to encourage spending, spending at a high interest rate! It is important to follow an important rule when you make purchases on reward credit cards, always repay the card in full each month so there is no interest. If you do not make repayments in full, your rewards will not be worth the interest you are paying. If you do not think you will make the repayments in full each month, it is advisable to opt for a different credit card with lower interest rates.

Don't 'spend more' when you have a reward card, simply use the card for all your normal spending. Replace your cash, cheques, charge and debit card purchases with your reward card so that you earn rewards on your normal purchases. Then just remember to pay the card off in full at the end of the month. If you have work expenses that you need to reclaim, this can be a great way to earn extra points provided you are able to make the full repayment before you have reclaimed your expenses.

Finally, never use your reward credit card for withdrawing cash. If you withdraw cash on a credit card you will often be charged a fee and you will get penalised with a high interest rate, especially if you are not able to pay it off in full at the end of the month.

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