Do or Don’t: Opening a credit card just for the rewards points?

by Kristina on January 24, 2013 · 6 comments

This is a post that I originally wrote for the Smart Money Debate at Ready for Zero.  I want to know if Dinks are pro or con opening a new credit card just to take advantage of rewards bonus points.  Can you guess where I stand on the subject? If you would open a credit card just to take advantage of the bonus rewards points we want to know why.

Come on Dinks, tell us about your credit cards!

In the past I opened credit cards for any number of reasons that included everything from gaining bonus rewards points and cash back to opening a new credit card just because it was offered to me.

Many banks are currently offering 0% interest balance transfers and one time sign up bonus rewards points to try and entice consumers to sign up for their newest credit card.  But before you sign that credit card application and get your bonus rewards points you have to ask yourself – do I really need another credit card?

Most likely the answer is no. Unless you are a teenager and you are applying for your first credit card you most likely do not need another credit card in your wallet.  Credit cards (more than one) do not help your credit score or your net worth, actually credit cards harm your credit score and your net worth more than they help them.  Many people feel that if they have a lot of credit cards with high limits it makes them more financially worthy but this is just not true.

Don’t be tempted to use your credit card for the rewards

Credit cards are not always bad because if you use them responsibly by spending within your limits and always paying off the balance each month they can be very rewarding.  However credit cards can also be a source of temptation that can lead to over spending and unnecessary debt accumulation.

Before you charge a purchase on your credit card just to get rewards points you have to ask yourself – would I still make this purchase if the rewards points were not an added perk? Once again the answer is probably no.  If you have one credit card you should use it only when needed.  Don’t overspend and make unnecessary purchases on your credit cards just to get bonus rewards points; you should consider the rewards points to be an added bonus and not the reason why you are making the purchase.

Make sure the credit card rewards are worth the cost

Credit cards rewards points can definitely be a temptation to spend and a reason why people sign up and apply for credit cards, but you have to remember that rewards points are usually a onetime bonus. Credit cards that offer rewards points usually come with an annual credit card fee.  If you are going to pay an annual fee for a credit card that offers rewards points you have to make sure that the annual fee is worth the rewards benefit.

What is your favourite rewards credit card?

Photo by stormkatt

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