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

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

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?

Message 1 of 20
19 REPLIES 19
Senior Contributor

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

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.
Spend: BofA Premium, BBP, Schwab Platinum, Freedom x 2, Costco, Discover
Perks: IHG49, Hyatt75, Marriott Brilliant, Delta Platinum
SD/AAoA Ballast: Arrival, CFU, DC, ED
Downgrading in 2020: BCP, Savor
Mostly earning MRs and cash back as I use up hotel and airline points spread across several programs.
Message 2 of 20
Regular Contributor

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

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%






Message 3 of 20
Valued Contributor

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

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.

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Message 4 of 20
Super Contributor

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


@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.


Total revolving limits 639500 (558000 reporting)
Message 5 of 20
Super Contributor

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

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.

Message 6 of 20
Community Leader
Mega Contributor

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

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. 

Message 7 of 20
Frequent Contributor

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

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. 

EQ 812 / TU 802 / EX 818 (Before the credit sprees will update soon)
Message 8 of 20
Established Contributor

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

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





Message 9 of 20
Mega Contributor

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


@RealityBites 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!

Message 10 of 20
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