topic Re: Using a Credit Card w/ Rewards vs. a good APR? in Credit Cards

Using a Credit Card w/ Rewards vs. a good APR?

ew0506 — Fri, 21 Jun 2019 05:47:19 GMT

Hello All,

What would be the better card to use?

1. Use my credit card with 16% APR and much greater rewards?

2. Use my credit card with little or no rewards, but has a 9% APR?

Yes, rewards are important for me to use for travel, gifts, and other items. I don't plan on keeping a balance of more than $1,000 on the card at any given time. If we look at just the financial aspect of 16% vs. 9%, we would have an easy answer, but I really like my rewards on the 16% card and how quickly I earn. The rewards can be used for just about anything as well.

The 9% APR card is great, and it's a fixed rate card but sadly, it has much of no rewards.

What would you do?

Re: Using a Credit Card w/ Rewards vs. a good APR?

wasCB14 — Fri, 21 Jun 2019 05:58:35 GMT

I would get a card with a 0% period and build up savings rather than spend money on gifts or travel. Any cash back rewards would go to savings.

$1,000 isn't a ton of debt but if your income is interrupted or you have unexpected expenses, it could get much worse.

Re: Using a Credit Card w/ Rewards vs. a good APR?

DoogieBall — Fri, 21 Jun 2019 11:30:03 GMT

Seems like any interest on any balance over a couple bucks would offset any rewards you would earn. I've read about plenty of people that don't consider their APR since they never carry a balance or keep it under 1%

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 11:38:24 GMT

If I keep balance, i will get low APR card.

Would reward card better for you? I don't know, because you didn't list the spending amount and earning rate.

Re: Using a Credit Card w/ Rewards vs. a good APR?

SouthJamaica — Fri, 21 Jun 2019 11:56:17 GMT

@ew0506 wrote:
Hello All,

What would be the better card to use?

1. Use my credit card with 16% APR and much greater rewards?

2. Use my credit card with little or no rewards, but has a 9% APR?

Yes, rewards are important for me to use for travel, gifts, and other items. I don't plan on keeping a balance of more than $1,000 on the card at any given time. If we look at just the financial aspect of 16% vs. 9%, we would have an easy answer, but I really like my rewards on the 16% card and how quickly I earn. The rewards can be used for just about anything as well.

The 9% APR card is great, and it's a fixed rate card but sadly, it has much of no rewards.

What would you do?

Rewards are meaningless if you are paying interest. So if you have to carry a balance on your card, it should be a low interest non-rewards card.

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 12:40:44 GMT

I always suggest that anyone that has to worry about APR to adopt and embrace a Transactor mentality so that you never pay a penny of interest. I don't know which if my cards has the best APR and the worst, as I've never paid interest to anyone. They can all raise my APR to 99.99% and it won't impact me adversely in any way financially. 9 times out of 10 any interest paid is going to wash away or exceed rewards earned, so paying interest effectively eliminates rewards from that perspective.

Re: Using a Credit Card w/ Rewards vs. a good APR?

Remedios — Fri, 21 Jun 2019 12:46:36 GMT

Carrying a balance on one of the two cards will make it a zero sum game at best. As long as you're paying "extra", you're not earning rewards.

As @wasCB14 mentioned upthread, if you have to carry a balance for a while, get a 0% card. That may even allow you to get caught up and stop paying interest altogether if that's the goal.

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 13:21:55 GMT

I just applied and got approved for Discove IT card with 0% APR for 14months its a low SL but I use it for the 0% APR and I am pretty sure will get more offers for the 0% apr after showing Discover I can pay the balance off quickly. For those that watch APR sometimes things happen and expenses have to spread out and its good to have a 0% or low apr to work with. In the real world sometimes you cant pay the amount in full every month, we each build our own credit the way we see fit.

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 13:47:21 GMT

Interest for one month at 9% annually is 0.75%. One month at 16 annually is 1.33%. Carry a purchase for 3 months and you've spent 2.25% or 4%

Even the most generous rewards are very quickly wiped out by interest charges.

I'm using a two-pronged approach. For things I can only get standard rewards on, I use my Amex Everyday card, which will have no interest till July 2020. For things that carry bonus rewards on other cards, I use what will give me the best rewards and pay in full.

So whether it's 5 points on airfares, 4 points on restaurants and groceries or 1 point on other things, they can all go into the same Amex rewards account

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 14:20:58 GMT

@Anonymous wrote:
Interest for one month at 9% annually is 0.75%. One month at 16 annually is 1.33%. Carry a purchase for 3 months and you've spent 2.25% or 4%

In the original post, OP was asking about which of the two cards to use, the discussion has gone on to other options such as a low/0 APR card. But keeping the original premise: OP was talking about a $1000 balance, so (using the figures above) you are paying either $7.50 a month or $13.30 or a difference of $5.80 per month

With enough spend and a generous reward card, rewards could make this up easily. $300 a month on a 2% card earns $6 more than a no rewards card. Of course, this is still losing money (as they are paying $13.30 in interest) but of the two, this is the better option. And at $700 spend, the 2% card would more than make up for the interest.

Yes, best not to carry balances, but sometimes a higher APR with rewards will win.

The big issue is that new purchases will not have a grace period, so better to pay as you go for those!

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 15:07:12 GMT

I'm curious, when you say you "...don't plan on keeping a balance of more than $1,000 on the card at any given time" , what do you mean by that?

As long as you pay off the statement balance each month, "keeping" that balance does not incur interest. For Example:

I spend around $500 a month on groceries. Now, I've already paid off the balance from last statement, but just given the nature of weekly shopping, when I paid it off the total outstanding balance was closer to $750; leaving $250 on there after clearing the statement balance. By the next statement it will probably be back at the $500 mark. I don't think that card has seen a $0 balance in years, but it is always paid in full each month so I have no interest charged.

Re: Using a Credit Card w/ Rewards vs. a good APR?

pinkandgrey — Fri, 21 Jun 2019 15:10:29 GMT

Depends on your spending plans, I suppose. If you plan on carrying the $1000 balance for awhile, definitely go with the lower APR card. If you can pay it off within a month or two at most, get those rewards.

Re: Using a Credit Card w/ Rewards vs. a good APR?

iced — Fri, 21 Jun 2019 15:12:16 GMT

@ew0506 wrote:
Hello All,

What would be the better card to use?

1. Use my credit card with 16% APR and much greater rewards?

2. Use my credit card with little or no rewards, but has a 9% APR?

Yes, rewards are important for me to use for travel, gifts, and other items. I don't plan on keeping a balance of more than $1,000 on the card at any given time. If we look at just the financial aspect of 16% vs. 9%, we would have an easy answer, but I really like my rewards on the 16% card and how quickly I earn. The rewards can be used for just about anything as well.

The 9% APR card is great, and it's a fixed rate card but sadly, it has much of no rewards.

What would you do?

No brainer for me, the rewards card. If you PIF each month (and you should) the APR is irrelevant since neither card will ever accrue interest.

Re: Using a Credit Card w/ Rewards vs. a good APR?

NRB525 — Fri, 21 Jun 2019 16:45:51 GMT

Waiting for the OP to return.

In the interim, I agree with LTL that the analysis should be on the marginal differences. If 9% is the floor interest rate in the discussion then the Rewards are compared to the marginal interest between 16% and 9%, not vs 16%.

In the same way, the angst over a 2% vs 1.5%, or 1.5 UR card is often not a big difference.

Re: Using a Credit Card w/ Rewards vs. a good APR?

dlister70 — Fri, 21 Jun 2019 18:04:43 GMT

Unless your rewards card has more than 7% rewards, then you'd be better off using the 9% card if you HAVE to carry a balance.

Otherwise, use the rewards card and pay it off every month.

As others have said, rewards are meaningless if you have to pay interest on the card. You typically can't get enough rewards to offset the interest that you pay by carrying a balance.

I got about $19 on my US Bank Cash+ card last month just for using it to pay my utilities. But then I have to subtract out the $5 or so in fees that I had to pay extra in order to use a credit card to pay utilities, so really the rewards are only $14. But still, some rewards are better than no rewards in this case because I had to pay those bills anyway and I didn't pay any interest because I paid it off when the statement came. In your case, you'd need to subtract your interest from your rewards just like I have to subtract my fees from my rewards to get a real picture of what you are earning.

And don't forget, the interest keeps on going until you pay off, so although one month of interest may be less than one month of rewards, you're still paying interest next month and the month after that until you pay off, so it's rarely going to make sense to carry the balance and use the rewards card.

Re: Using a Credit Card w/ Rewards vs. a good APR?

KJinNC — Fri, 21 Jun 2019 18:12:12 GMT

Horses for courses.

If you don't carry a balance, APR makes little or no difference, and will be dwarfed in value by decent rewards.

If you do carry a balance, the advantage of a low APR will probably dwarf the advantages of rewards.

For many people, it may make sense to have both, with the low APR card being like an emergency fund, but with rewards cards used for everyday spending.

Re: Using a Credit Card w/ Rewards vs. a good APR?

Kforce — Fri, 21 Jun 2019 19:23:28 GMT

@Anonymous wrote:
Yes, best not to carry balances, but sometimes a higher APR with rewards will win

+ 100

1000 spend with 1.5% rewards = 15

1000 spend with 2% rewards = 20

1000 spend with 3% rewards = 30

Cost of 1000 @ 16% with equal payments to pay in 3 months = 27

Cost of 1000 @ 9% with equal payments to pay in 3 months = 15

-------------------------------------------------------------------------------------------------------------------------------------

Difference = 12

If the rewards are >= 1.5%, use the cashback card, you only need to clear $12 to win

However as @longtimelurker wrote:

The big issue is that new purchases will not have a grace period.

This could be a problem if you continue to use the card

Re: Using a Credit Card w/ Rewards vs. a good APR?

Anonymous — Fri, 21 Jun 2019 20:46:01 GMT

@dlister70 wrote:
Unless your rewards card has more than 7% rewards, then you'd be better off using the 9% card if you HAVE to carry a balance.

No, the issue is that calculation neglects that the APR is for carrying the entire balance for a year, whereas say a 2% card gets that reward on the transaction. Also, total spend can far exceed the balance carried (when you can pay most but not all).

Re: Using a Credit Card w/ Rewards vs. a good APR?

galahad15 — Mon, 24 Jun 2019 17:40:20 GMT

It's very easy for anyone these days to get a 2% rewards card with high, double-digit interest rates. Definitely not as easy by far and by an exceptional order of magnitude (although not necessarily impossible, given some current CU card offerings) to get a card with a 9% F, go-to interest rate.

My advice would be to hold on to the 9% card and continue to use it for your revolving balances, and use the rewards card with PIF to continue to retain your rewards, Just my $0.02 and to each his or her own.

Re: Using a Credit Card w/ Rewards vs. a good APR?

NRB525 — Mon, 24 Jun 2019 22:10:58 GMT

Or use a rewards card for the rewards, and periodically BT amounts over to a Discover card at 4.99%.

... and still no OP ...