It is an epic battle, one waged since the dawn of time…well not quite that long, but the battle between credit card rewards and credit card debt is one which polarizes people the world over.
But today we end it with a duel – en guard!
The Strengths of Knight Reward
Knight Reward is often accused of being an underhanded competitor – offering the possibility of the carrot, only to beat you with his stick.
How to use a credit card for the rewards:
A rewards credit card must be used with a high interest savings account fighting alongside.
Knight Rewards’ most famous battle cry is the fact that credit cards can be used throughout the month, during their interest free days, for all purchases while your salary is in a high interest savings account accruing interest, or is in an offset account linked to your home loan, offsetting the interest you will have to pay on your mortgage in the month.
To be given the chance to win, your credit card must be allowed to fight, and to combat the high annual fees which often come with rewards credit cards, you will need to be spending at least $2,000 each month on your credit card before you consider going in to battle alongside Knight Rewards, to accumulate enough points to make you eligible for rewards which will compensate you for these fees.
You must always clean your sword before returning it to its sheath.
If you fail to pay your rewards credit card balance back to zero before the end of the interest free period, even the fearless Knight Rewards won’t be able to save you – you’ll be ensconced in interest and monthly repayments which will override the value of any rewards you may earn.
However, using a credit card and paying it down to zero each month gives you a strong credit report and shows your financial responsibility.
Choose a rewards credit card which actually allows you to earn rewards.
Some rewards credit cards are drawing you into a battle you’re bound to lose with unrealistic terms, conditions and usage periods for your rewards points.
However, there are many credit cards which will offer you the chance to choose gift vouchers or fuel vouchers with the points you have built up in your spending and some gold cards will also allow you to earn two points for every one dollar you spend.
Know the rules of the credit card battle.
If your rewards points do expire, make sure you can easily keep track of them and cash them in for rewards before you lose them. Also make sure that the rewards you can earn are ones you actually want, and that you are given choices between charity donations or cookbooks, movie tickets or a hair straightener.
A savvy purchaser can deftly avoid interchange fees. Some rewards credit cards will attract a higher interchange fee, but most Australian retailers will advise you of this additional fee before processing the purchase – therefore, look for a credit card with a companion card which attracts lower interchange fees.
For example, take a Mastercard or Visa into battle with a companion American Express card, AmEx can earn you higher rewards, while fighting in a tag team with Mastercard or Visa to avoid high interchange fees. An informed credit card user also knows interchange fees are just one of the many costs of doing business.
He’s put up a good fight, but is it enough to allow Knight Rewards to maintain his dominance on the credit card battlefield?
The Strengths of Challenger Avoid
Challenger Avoid is a somewhat meek competitor – taking the road of least resistance in the battle and in risking nothing, he attracts no ire.
Challenger Avoid knows his weaknesses and if you’ve identified similar weaknesses then you may choose to fight alongside the stoic warrior Avoid.
Avoiding credit card battles:
The cost of not-so-innocent interchange fees is just too high.
Avoid is proud to fight the good fight on behalf of all consumers and holds strong to his belief that interchange fees which merchants are charged to accept credit cards are a cost passed onto all buyers, regardless of their payment method.
Challenger Avoid will avoid credit card use to save himself from the costs of interchange fees, while hoping the decreased use of credit cards will decrease the cost of interchange fees to businesses, and in turn customers.
The battle of the credit cards preys on the weak.
Challenger Avoid chooses not to fall victim to the seemingly enticing deals which he believes are only a clever disguise to get him deeper into debt, in turn earning the credit card companies more interest.
Challenger Avoid knows the credit card companies don’t ever want him to pay off his balance, and chooses not to spend an eternity being encouraged to spend.
Know Your Credit Card Habits
Knowing your spending habits helps you responsibly avoid bad debt. If you have faced past battles with credit card debt and lost, or you don’t want to tempt yourself to spend money which is not yours, Avoid encourages you to not show your weakness to the credit card companies.
If you don’t think you can pay off your credit card to zero each month, or only use it for essential purchases, then the best way to ensure you stay debt free is to avoid the temptation to use credit.
A doppelganger debit card can give you the same convenience as credit. If you have chosen to avoid credit card use, you don’t have to forge the ease and security of paying with plastic.
You can instead employ a decoy – a debit card which looks and acts just like a credit card, but which links to your transaction account and allows you to only spend your own money.
Debit cards offer you the security to pay for bills over the phone or make online purchases and can even offer rewards of their own – Visa Debit cards for example give you first access to concert ticket releases and discounts on audio entertainment equipment.
A worthy opponent, who has now earned himself an equal rank beside Knight Rewards, but has Knight Avoid been able to topple his historic foe?
The battle has been fought and won, with each side offering a mighty show of strength and determination for their cause, with the duel making champions of both competitors.
How About You?
The duel between Knight Rewards and Knight Avoid will go down in history, so which side will you be fighting on in the future?
Fred Schebesta write for Credit Card Finder and Savings Account Finder, where he helps people to compare savings accounts and credit cards