Cash back rewards could equal more credit debt
Cash back credit cards have been one of the more popular products offered by lenders in the last few years, as consumers who are eager to increase their savings on gas, food and other necessities have flocked to the item.
But while this type of card can be a valuable money-saving tool when used sparingly, swiping it for too many purchases can cause consumers to rack up credit card debt.
When using these cards, it’s easy to slip off budget, especially when they replace cash and debit cards as the main form of payment at the checkout, Yahoo News reports. While all the debt incurred may be manageable given a current account balance, an unexpected job loss or major expense could quickly lead to an overwhelming balance, and subsequently, high interest payments.
Consumers may still benefit by using the rewards cards for large purchases, as getting 1 percent cash back on a new car or television set can mean big savings. However, consumers will be tempted more frequently in the coming months, as these cards are expected to be the biggest growth sector for credit companies in 2011.