Why you misjudge the benefits of your credit card
No matter how much you love your credit cards (and some of us really do), there’s one thing we all hate: the annual fee. And nowadays, it often seems like annual credit card fees are increasing every day. Cards that cost $ 400 a year not too long ago now cost $ 550 and up, a lot more.
In theory, all of these costs are reimbursed through rewards and credit card benefits. In reality, these benefits are only valuable to the extent that you create them.
When you shell out hundreds of dollars a year just for the privilege of using your fancy rewards card, it’s important to know that you’re getting what you pay for. Sadly, many of us may be overstating the benefits of our credit card, a mistake that could cost a fortune in fees.
You probably don’t use them all
One of the main ways that many people overestimate the benefits of their credit card is by assuming that they will use them to the fullest each year. For example, let’s say your card gives you $ 20 per month in Uber credits. Sounds good, doesn’t it? Of course, if you use Uber. On the other hand, if you live in the suburbs and drive everywhere, you might not be maximizing that annual credit after all.
Even larger credit, like general travel credit, can be difficult to maximize each year if you don’t travel regularly. Unless you know you’re going to be traveling at least once or twice a year, that travel credit could be wasted.
Of course, it’s not just about statement credits. This sophisticated travel rewards card may come with elite hotel status, but if you only stay with this brand of hotel once a year, are you really getting your annual membership fee worth of that status? elite?
Oh, and let’s not forget the TSA PreCheck credit offered by most travel cards. Most people don’t travel enough to make it worth getting PreCheck approval. Even if you get PreCheck, if you have more than one credit card that offers credit, you can’t double down, which means the rest of your credit will be wasted.
When you evaluate your credit cards each year, make sure you are realistic about how many benefits of your card you are actually using. If you’re not going to use a benefit, don’t count it in the value of the card when deciding if it’s worth its annual fee.
Another thing to consider when looking at the benefits of your card is not just if you are using your credits, but how you are using them. Unless you’ve made these purchases before, redeeming your card credits could cost you money that you wouldn’t otherwise have spent.
Take the example of Uber credit. If you don’t often carpooling, you might prefer to use your monthly credit with an UberEats delivery. However, the cost of your order is very likely to exceed the credit you will get from your credit card. So if you don’t normally order UberEats, you are wasting money using your credits.
And the same goes for other types of card benefits. A $ 300 annual travel credit is good, right? Who doesn’t want $ 300 in free travel? But if you weren’t planning on traveling without this credit, you wouldn’t really be doing it. Instead, your annual fee is basically only used to prepay for unwanted travel.
No waste, no value
The only way the benefits of credit cards have any value is if they add value to your list, not decrease it.
When it comes to deciding whether your expensive rewards credit card is delaying the end of the deal, it’s worth being brutally honest about its true value. Are you using the benefits just to use them or because you get real value from them?
If you find that you are doing everything you can (or out of pocket) just to use the benefits of your credit card, then those benefits may not be of use to you. Instead, consider finding a new credit card with benefits that better suit your spending habits and lifestyle.
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