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Should Cards with Cash Reward Signups be a Consideration if You're Paying down Debt?

leo222
Contributor

Should Cards with Cash Reward Signups be a Consideration if You're Paying down Debt?

I have been paying down my debt very aggressively this year...I have made great progress, and have paid down almost half of it, as well as raised credit lines by almost $10,000 in the past couple of months - in all this time, I didn't use my credit cards for anything...Just cash and/or debit card.

 

As a result of this, my FICO has gone from 620 to 703 in a very short amount of time...I expect my FICO to get to around 720, by next month. By that time, I plan on applying for balance transfer cards, so that I can pay off the rest of my debts interest free. My better FICO scores should hopefully help me to do that.

 

With that said, I have gotten some offers in the mail for credit cards with Cash Rewards signup bonuses. One specific offer is the Capital One SavorOne Cash Rewards Credit Card. You get $150 for spending $500 in the first three months. I am self employed, and feel like I can easily spend that on eBay fees that I already pay with PayPal every month anyway.


Wondering what you guys think about this.

Message 1 of 5
4 REPLIES 4
FireMedic1
Super Contributor

Re: Should Cards with Cash Reward Signups be a Consideration if You're Paying down Debt?

You'll gain some points by letting one of your cards report a less than 8.9% balance and then PIF. Having no cards report anything can cost 15-25 points on average.





Homeowner since Sept 2020. My posts are JMHO. My siggy is not to brag. Just sharing my experiences after BK from learning here from rebuild to recovery from the @ 540's.
Message 2 of 5
allinav
Established Member

Re: Should Cards with Cash Reward Signups be a Consideration if You're Paying down Debt?


@leo222 wrote:

I have been paying down my debt very aggressively this year...I have made great progress, and have paid down almost half of it, as well as raised credit lines by almost $10,000 in the past couple of months - in all this time, I didn't use my credit cards for anything...Just cash and/or debit card.

 

As a result of this, my FICO has gone from 620 to 703 in a very short amount of time...I expect my FICO to get to around 720, by next month. By that time, I plan on applying for balance transfer cards, so that I can pay off the rest of my debts interest free. My better FICO scores should hopefully help me to do that.

 

With that said, I have gotten some offers in the mail for credit cards with Cash Rewards signup bonuses. One specific offer is the Capital One SavorOne Cash Rewards Credit Card. You get $150 for spending $500 in the first three months. I am self employed, and feel like I can easily spend that on eBay fees that I already pay with PayPal every month anyway.


Wondering what you guys think about this.


Personally speaking, I'd focus on the absolutes of the situation.  What I mean by that is, you already know for an absolute fact that you're going to be applying for a BT card.  I don't know what you're monthly spending habits are, but even if you transitioned 100% to using a new cash rewards card instead of cash/debit, and then simply paid off the card at the end of the month with the cash you didn't spend, you're not going to outweigh the savings of a great BT card.  Bank of America has the BankAmericard that has 15 billing cycles 0% and no balance transfer fee.  I wouldn't jeopardize what you know for a fact you're going to be doing in exchange for some temporary rewards.

 

I'm well versed in BofA's products, so I'll stick on that train to make a mathmatical point.  Let's say you got their cash rewards card, which has a $200 bonus if you spend $1000 in 90 days.  It also has 3%, 2% and 1% categories (but, like most cards, higher tiered earnings are capped).  On their card, if your combined quarterly spending in the 3% and 2% categories is more than $2500, it drops down to 1%.  So let's say you spent 100% of your money in a 3% category (which isn't going to happen, but let's just say it did), that's $75 a quarter.  In exchange for you possibly jeopardizing the ability to get a top notch BT card in a few months, you net a piddly $275.  I'd prefer to make every effort I could to move a few thousand dollars from one card to another without having to pay anything to do it.

 

I wouldn't make any moves, as you were already doing anyway, and make sure you get the best BT card you can.  After that, do whatever you'd like, but I wouldn't do it before.  My two cents Smiley Happy

Message 3 of 5
leo222
Contributor

Re: Should Cards with Cash Reward Signups be a Consideration if You're Paying down Debt?

Thanks for the reply - Yeah, I was actually thinking about applying for separate cards (i.e. balance transfer, and then possibly another one solely for their rewards) - I have no hard inquiries and no credit card applications in the last 2 years.

 

I kinda felt that I would have to spend the money anyway on eBay fees and that I would pay in full every month. The $150 would be really nice to just throw at my debt, and help me eliminate it that much sooner.

Message 4 of 5
allinav
Established Member

Re: Should Cards with Cash Reward Signups be a Consideration if You're Paying down Debt?


@leo222 wrote:

Thanks for the reply - Yeah, I was actually thinking about applying for separate cards (i.e. balance transfer, and then possibly another one solely for their rewards) - I have no hard inquiries and no credit card applications in the last 2 years.

 

I kinda felt that I would have to spend the money anyway on eBay fees and that I would pay in full every month. The $150 would be really nice to just throw at my debt, and help me eliminate it that much sooner.


Oh, yeah, if you're able to do both then I'd say go for it...I just would do it in the order of BT card and then cash rewards card, not the other way around.  Only because I wouldn't want to do anything that might even cause the slightest chance of not getting the best BT card I could.  The savings on interest/fees for a high end BT card are going to far outweigh the rewards on a cash rewards card.  So if you can knock out the best BT card for your buck and then get the cash rewards card and throw the bonus at the debt too, why not.

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