Reward cards come with benefits of earning points while you swipe for various purchases. Such features can be suitable for big spenders, but what happens when you overspend and attract credit card debt? Is it possible to use your rewards to pay off your debt? Here is what you need to know when it comes to your options and how to use your reward points to pay off your debt.
Is it possible to use your rewards to pay off your debt?
Reward credit card comes with big bonus point sign ups that can be converted to cashback rewards which can be used to help card owners reduce their card debt. Overspending on your reward cards may unlock reward points in the process, but it could also cause cardholders to default on their credit card repayments which can cause a debt spiral. Another thing to consider is that the interest rate that is applied to your card balance can outweigh your rewards.
Using reward points to pay off credit card debt
The main way that you can use your reward points to help pay off your credit card debt is by redeeming your points as a cashback which is deposited in your account. Keep in mind that reward programs vary in terms using your points for a cashback based on whether you have an account credit or an annual fee credit. Therefore, check your reward program to see how you can redeem your points as a cashback. This could take up to 2-30 days until it is reflected in your account.
Will it be cost-effective?
It is important to weigh the pros and cons of converting your reward points to cashback if you want to get more value for your money. This will depend on your reward program and what type of value they place on each point. Cashbacks credit cards tend to reward cardholders with a minimum of $100 to $250 at most depending on the type of card you are using. Furthermore, you need a certain amount of points that can be redeemed as cashback points. Compare your options to see whether redeeming your points as cashbacks will offer you the most value.
Although it is possible for you to use your reward points to help you reduce some of your cards debt, it is important to keep in mind that it will not reduce your monthly minimum payment which means that you will stay have to pay this off. Consider looking at alternative options to reduce your credit card check by checking if your card is suitable for the type of buyer that you are.
Checking things such as your cards interest rate, fees, and charges will let you know whether the card is affordable for you. Balance transfer credit cards also come in handy when it comes to managing credit card debt.
Changing the way you spend money by tracking what you spend it on can help you maximise your balance transfer card.