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Credit Cards

The Pros and Cons of Rewards Credit Cards

Are you dreaming of flying to Europe without paying a penny?

You must already have heard of rewards credit cards. Unlike cashback credit cards, they compensate you for using their service with bonuses, free airline miles, and free access to airport lounges. Earn enough points and you will be able to travel and stay abroad for free. Although, there are some points you need to consider before purchasing them. This post is intended to make you aware of the pros and cons of rewards credit cards.

Pros of Using Rewards Credit Cards

1) You get a fat intro/sign-up bonus

Lookup any rewards credit card online and you will see phrases like “$150 after you spend $500 on purchases within 3 months from account opening“. This is not a bait. You will get $150 after you spend $500 in the first 3 months of account opening. Intro bonus is one of the best features rewards credit cards have to offer.

2) $0 Annual Fee for the first year

The annual fee is nothing but a fee charged by the credit card company for use of a credit card. Usually, credit card companies do not charge an annual fee in the first year. The features make owning a rewards credit card more enticing. No annual fee, low APR, no foreign transaction fee and intro bonus make it easy for newbies to get their hands wet without paying much initially.

3) No foreign transaction fees ever

Ordinarily, to buy something from a foreign country, whether by physically traveling there or via online stores, you are supposed to pay a foreign transaction fee of 1-3% of the total amount spent. With a rewards credit card, it is possible to completely avoid paying this fee. In the long run, it can save you hundreds of dollars.

Cons of Using Rewards Credit Cards

1) Annual Percentage Rate(APR) cannot be avoided

The annual percentage rate (APR) is the interest rate charged on credit card balances each year. Now, if you are lucky, you will find a credit card that does not charge an annual percentage rate (APR) in the first year, but they are few and far between. Most companies will charge you an APR of 15.74% – 25.74%(this is what Capital One charges). Moreover, the interest rate also depends on your credit score.

2) The late payment fee can reach up to $25

Miss paying your minimum payment by the payment deadline, and you will be charged a late fee up to $25. The late fee can also go up to $35 if you had missed another payment deadline before–in the last 6 months. Each month, you are required to repay at least a “minimum payable amount” to your credit card company. Late fee is one of the biggest causes of credit card debt; as it multiplies as time passes.

3) Cash advances can hurt your credit score

Cash advance is a facility provided by your credit card company. It allows you to withdraw cash, either through an ATM or over the counter at a bank. The withdrawal limit is set based on your credit history. Although the facility to withdraw cash works great; particularly, during emergency periods. But there is a caveat. It will hurt your credit score if the credit utilization ratio crosses the 30% mark.


I hope the above post helped you decide whether rewards credit cards is good for you or not. Like purchasing any other service, it is recommended to do thorough research before selecting a rewards credit card too. Let me know if you agree with the pros and cons shared above.

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Erin Thompson

Erin Thompson spent years managing her own blog about budgeting and debt. Because of that, she has great insights not only about managing spending and borrowing but also about running websites profitably. When she's not writing articles for us, she's traveling and looking for new types of wines to try.
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The content on is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.