Learn When to Say Yes or No to Reward Programs!

“And do you want to sign up for our rewards system?” We’ve all heard this question when purchasing our items at the register. For many of us, we are unsure if we should say yes or no. It seems as if saying yes will save us money and time, but is that really the case?

Rewards systems involve earning points or discounts for transactions on a specific credit card. When you purchase things with your card, you gain points that can be used toward a reward in the future. It seems as if every major company offers a rewards system these days, so it’s about time we properly educate ourselves and see if it’s really worth it.

We’ve done some research and gathered some words of wisdom from a financial advisor so the next time you are asked that question, you are prepared to answer it.

Financial Advisor Fred Hilton of CAMPUS Investment Services at CAMPUS USA Credit Union shared great advice regarding rewards programs: “Understand the company’s procedure. You may lose your rewards if you have a late payment or exceed your limit. Last year 16 billion dollars, reward points or flyer miles went unredeemed. If you are using a rewards card, get the rewards you are paying for.”

Next time you are asked about signing up for a rewards system, think about the pros and cons, and make sure to ask these questions:

Are there annual fees?
Are there reward limits?
Are the rewards (cash back, discounts, free travel, etc.) something that will benefit you at this point in your life?
What is the interest rate?
Is it a “use it or lose it” rewards program?

If you like the answers to all those questions, go for it! You will be saving cash and gaining rewards. But, if the answers to those questions seem concerning, maybe your answer should be “No, thank you!”

PROS

Earning money: Who doesn’t want extra cash? With some rewards systems, if you use the card correctly and intelligently, you can end up earning money on your everyday purchases.
Easy savings: Sometimes rewards cardholders are allowed to transfer their cash back rewards into
a savings account. Easy savings are the
best savings.
Taxes: Some rewards systems allow cardholders to pay their taxes with their reward points.
Bonus rewards: Sometimes your credit card rewards system allows you to go
on adventures or buy things you wouldn’t normally purchase.

CONS

High interest rates: Cards that offer cash back rewards sometimes come with high interest rates. Read the fine print!
Annual fees: Some rewards systems offer little to no annual fees while others require a high annual fee, so watch out.
High limits: Most rewards systems require spending a lot of money in order to get the rewards. So if you don’t plan on spending a lot of money on this card, it may not be worth it to sign up.
Careless spending: The biggest downside to rewards systems is the temptation to overspend. Many people tell themselves that spending more will end up being less expensive since they will receive reward points or cash back, but that’s not always the case.