Can Reward Credit Cards Affect Your Credit?

Reward credit cards allow you to collect points or miles towards purchasing flights, hotels, rental cars, merchandise and other free stuff. Usually you’ll have to collect enough points in order to buy your desired freebie. Not all reward programs are created equal and every points system is different in the way it works.


It’s hard to turn down free rewards. This is how credit card companies entice people to sign up to use their credit cards. It’s important to remember that these companies are in the business to make money and they’re not offering these rewards with the possibility that they’ll lose money. These reward cards are beneficial to you if you pay back the balance in full each and every month otherwise you’ll be paying for the reward yourself in interest and annual fees.


How can a reward credit card affect my credit rating?


For many people, it’s easy to get sucked in through the tempting sign up bonus offers or immediate discount on your purchase. What starts happening here is that you can get caught up in the hopes of getting further discounts and you focus on accumulating those points that you fail to see that your debts are piling up. The more cards you have, the harder it is to keep track and all the while your credit rating is being tarnished.


Every time you sign up for a card, the lender requests a credit score and an inquiry is placed on your credit report. If you have too many requests for credit, your behaviour will be associated with those who have a higher chance for default. Even if you don’t use your credit cards, the available amount of credit you have can harm your credit score.


Reward credit cards can save you money but you have to be extremely knowledgeable on how these cards should be used so keep things in perspective.


When people spend with credit, they tend to overspend so if you find yourself in that position, stop putting things on your credit card immediately until you have your card paid off. Once this, limit your cards to 1 or 2 and then you can reconsider using them for rewards as long as you are able to pay off the balance IN FULL every month.


For more valuable information and tips on how to manage money, visit www.prudentcreditrepair.ca