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How Credit Card Reward Programs Can Keep You in Debt by Design

Frequent flyer miles, cash back rewards, discounts at your favorite retail stores, and other “rewards” incentivize a culture of debt.

Consumers believe that credit cards are saving them money or helping to generate cash back rewards; when really, these promises are encouraging people to spend more. The more they spend, the more of these rewards they are promised. When we stop to think about that, it makes very little sense. However, when people sign up for credit card offers, these rewards seem like a fantastic deal.


Seeing Through the Flimsy Benefits


It’s important to see credit cards for what they really are—expensive loans. All credit cards allow you to buy now and pay later, but this convenience comes at a definite cost. Percentage rates, annual fees, and the impact that credit cards can have on your credit score are all risks and costs that you will need to examine carefully. While credit cards can help to build credit, they can also pummel it beyond recognition.

If you have credits cards with rewards programs and use them responsibly, it pays to remember some things:


  • Cash back doesn’t always mean cash back from every purchase. Many of those cards will only offer a slim percentage of the cash spent at specific stores. These are usually places that the cards partner with, and they may not be first on your list of shopping or gas station stops. Always read the fine print. Airline miles can be so small, that you’ll need to run up $10,000 or more just to qualify for a flight across your territory. Get to know the reality behind the hype.
  • Those rewards can come at a serious cost. Some cards use the promise of rewards to offset the high fees and percentage rates. Don’t let rewards distract from the amount you are actually paying for access to those funds.
  • There are limits on what you can receive certain cash back percentages on. It’s important to know what the card specifies, and the rate of return. If you can only receive 2% back on purchases on one card, this can still be a better deal than what you’ll be receiving on a capped 5% return on another card. There are online tools that allow you to compare and contrast different credit card offers. Having good credit means being a responsible consumer and doing your homework.

Credit cards should be used sparingly at best. There are other ways to build credit, and it’s essential that you speak to a financial advisor before making any definite decisions. One bad credit decision can follow you for decades.

Credit Card Counselling is Essential in Managing Your Debt

Debt doesn’t have to be an overwhelming force in your life. D & A MacLeod has the resources you need to make informed decisions regarding major purchases and credit cards. Whether you are just starting out or need debt help, we can connect you with financial experts.


Don’t wait. Contact us today at D. & A. MacLeod and schedule a consultation for credit card and debt counselling in the Ottawa and Eastern Ontario region today.
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