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

[ew0506]

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?

[wasCB14]

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.

[DoogieBall]

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%

[Anonymous]

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.

[SouthJamaica]

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@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?

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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.

[Anonymous]

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.

[Remedios]

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. 

[Anonymous]

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. 

[Anonymous]

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

[longtimelurker]

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@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%

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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!