Do holiday credit card bonuses or cash back rewards out way the negative consequences? Credit card companies are offering unusual rewards for making purchases at specific stores this holiday season. According to a recent article from USA Today, American Express, among others, is offering five times the amount of reward points when their card is used on purchases at certain chain stores.
There is no question that five times the reward points is a huge bonus for those who do or want to collect reward points. Credit card holders who change their shopping habits just to receive the bonus rewards, as the credit card companies hope, may believe they are getting the better end of the deal. However, consumers need to read the “fine print” as they may not receive what they think they will receive.
The most important factor for a consumer to consider when using a “bonus” credit card is the ability to pay off the bill in full at the end of the month. Not paying the full amount due negates the rewards, according to the article mentioned above. Credit cards give purchasers an immediate satisfaction, but that satisfaction is gone when the bill comes and they are not able to pay the bill in full. Credit card companies design such campaigns for their chain store clients, realizing that they will not have to pay up most of the bonuses offered. According to an Excel file from BBA, 67.4% of credit card balances were bearing interest in February 2011. This is mostly carry-over spending from the holidays.
So the question is…are holiday deals purchased with credit cards really worth it? The answer will boil down to the ability of the credit card purchaser being able to pay off their bill in full when the next billing cycle comes around.