Are Credit Card Rewards Actually Free? Comments36 Comments

Credit cards are a common denominator for many consumers even across borders. These world wide ways to pay have found homes in the wallets of a high percentage of those who qualify to use them. With such a booming product, more and more lenders join the game creating mass amounts of competition in the credit card industry.

To make their credit cards stand above the competition, many lenders carve out their own little niche in the rewards industry. For instance, American Express did a great job with SkyMiles Credit Cards by partnering with Delta Airlines, Discover is pretty well known for cash back rewards and Chase created a Disney credit card that’s still a big hit to this day.

One thing these credit cards all have in common is that they all reward you for using them. Although their points systems will each be a little unique, they all work in a relatively similar way. As you make purchases, you will earn points, the points will add up and when you are ready, you can cash them in for the rewards that the card comes with. Pretty simple huh?

But, there’s one big question that’s raised around all of this, “Are credit card rewards really free?”. And, there are a couple of answers to this question. Here they are…

The Technical Answer – Yes, rewards provided by credit card companies are free. You don’t pay a penny for your rewards, you pay for your debts.

The Realistic Approach – Because you are getting rewards in return for using your credit card, chances are, you will use it more than you did in the past. The resulting debt will cost you money. Not to mention the debt you were already racking up. Therefore, the only way to get free credit card rewards is to use your card properly.

How To Get Your Credit Card Rewards For Free

Choose The Right Credit Card – If you want to get rewards while paying absolutely nothing for a credit card, you’re going to have to choose a good card. Chances are, to qualify for the card, you will need great credit scores. The card that you are looking for offers the rewards you want, no annual fee and a grace period of at least 30 days. If you find a card that matches these 3 criteria, chances are, it’s a good choice.

Use Your Card Within Reason – You are going to have to use your card to earn rewards. But, when you get your credit card, don’t go out making purchases left and right without thinking about the consequences that will follow your purchases. Your worst enemy in this process is a month to month balance. Therefore, it is up to you to keep your purchases within a certain amount that you can afford to pay back each month.

Pay Your Credit Card Off Each Month – The reason you want a card with a 35 day grace period or longer is so that you have a more than reasonable amount of time to pay the bill. If your balance lasts for longer than 35 days you will be charged interest so, make sure that you pay it off every month on a specific day. In doing so, you will avoid interest all together.

Final Thoughts

Although rewards credit cards are a great way to earn freebies here and there, it’s important to make sure you know what you are doing when using them and that you stop when you take it too far. The bottom line is, rewards credit cards create a game out of spending. A habit that should only take place as a necessity is now a way to earn points. If you have an addictive personality or addictive spending habits, I strongly advise the use of a different type of credit card.

Author Bio: This article was written by Joshua Rodriguez, proud owner and founder of and avid personal finance journalist. Join the discussion with Joshua on Google+!

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By : Josh Rodriguez | 10 Jun 2013
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36 thoughts on “Are Credit Card Rewards Actually Free?

  1. Pauline

    They are free if you use the card for usual purchases and pay the balance in full each month. Unlike store reward points that are actually part of the pricing policy of anything you buy in store, they get paid by people who do not manage their card properly and carry a balance. You can choose to be on one side of the other. As per whether you would spend more to reach the reward threshold, maybe, but that would also defeat the purpose.

    1. Joshua Rodriguez

      Pauline, Thanks for your comment. Paying your bill in full each month does make them free…aside from annual fees which, if you do your checking around are pretty low if not 0! Also, thanks for your addition about store credit card rewards…great point there!

  2. Sean @ One Smart Dollar

    I think a lot of people thing earning miles via your credit card is a trap. As you stated all you need to do is make sure you pay off your balance every month. There are also a lot of tricks where you can get miles/points without even spending a dime. :-)

  3. The College Investor

    Interesting article, Joshua. I have to agree it pays to be careful when using your credit card, you might be getting something in return, but you might end buying things just to increase your points and get the rewards you want.

  4. Canadianbudgetbinder

    They are as free as they come for us. We don’t pay any fees and we pay our bill on time paying no interest on our credit cards. We’ve made money, spending money that we would never have made if we used cash. Was it worth it? You bet!

  5. Kim@Eyesonthedollar

    We have a 10 day trip coming up funded mostly by credit card reward points. I don’t feel we bought anything we wouldn’t have anyway. Getting free stuff is like icing on top, but you do have to be careful and should never get spend money on a credit card you can’t pay off every month.

  6. thepotatohead

    You really need to make sure you pay your balance off each month or else the interest you are being charge will probably cancel out any rewards you might receive. The best ones are the ones that give you rewards and cash for signing up :p

  7. Debt Blag

    Credit card companies are very good at making tons of money, so they wouldn’t offer rewards if they didn’t make lots of money from them.

    Another way to think about it is that it’s very possible for them to be free, and there is a very clear path toward this outcome. In this case, for the credit card companies to make money, somebody somewhere has to be subsidizing your free rewards…

  8. Doable Finance

    We buy what we need. We don’t think about rewards at the time of purchase. The credit card companies would surely want to ingrain the thinking that the more you buy, the more you get the rewards. Many folks fall for the advertisement and spend a lot more than they can really afford.

    1. Joshua Rodriguez

      Thanks for your comment Doable Finance! That’s the best way to go…just make sure to use your card for what you need and remember to pay your balance off in full each month and you should be good to go!

  9. cj

    The credit card reward program…It is baffling to me how everyone forgets the merchant where you buy your goods with your credit card to get those reward points.

    Did you know that different reward cards charge the merchant higher amounts depending on the customers reward. That cost is anywhere from 2. something percent to almost 4% depending on the card the consumer is using?

    Do you know who is paying those fee’s? Not just the but the customers. All of them. Even the ones paying cash because the merchant needs to charge more for the product in order to cover these fee’s.

    Did you ever wonder why when you flash cash at a retailer and ask for a discount, you get one?

    Next time your flashing your shiny plastic to make a purchase, especially a large purchase….think about the reward points your getting and really ask yourself….are you getting anything really?

  10. Greg@ClubThrifty

    Honestly, we use our credit card to buy everything anyway, so why not get the free rewards? We don’t spend more than we normally would just for the reward. In fact, we pay them off several times a month.

    1. Joshua Rodriguez

      Hey Greg, the way you’re using your card, you should get rewards! You’re doing it right and you should take advantage. The key is using your rewards card properly to make sure that the rewards you earn are actually free!

  11. Thomas | Your Daily Finance

    Kinda of reminds me of the sales that say buy 100$ of something get $25 free. Well its only good if you were planning to buy 100$ worth of stuff in the first place. Same with the credit card. If you use it as you normally would the the perks are well perks.

  12. Grayson @ Debt Roundup

    The biggest issue with rewards cards is that they charge a higher interest rate than normal credit cards. While this is not a big deal if you just pay off your balance each month, you can get in trouble if you fail to do so.

  13. Alex @ Searching for Happy

    From what I understand, there are fees that credit card companies charge to merchants to accept the cards, so we’re all probably paying already, it’s just a matter of maximizing your advantages!

    1. Joshua Rodriguez

      Hey Alex, I’m actually just learning that…I’m going to do a bit more research on it and may write a follow up. However, I was addressing more the cost to consumers of point based purchases rather than using credit cards responsibly because of the concept of points and how much that could cost. I really appreciate your comment!

  14. Julie @ Salesvu

    Hi Joshua, really your advice should be applied every person. You taught how to use credit card smartly. Thanks

  15. Paul Martterer

    Merchants definitely pay a premium when they accept a Rewards Card for payment. My shop was recently hit for an additional 3.8% on top of our usual rate of 1.9% for a particular transaction. You’re dreaming if you think that Big Retail hasn’t cracked this code and woven the cost into its retail pricing. When you think of it, they’re bribing you with your own money. Charge away!


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