How rewarding is your rewards credit card?

Rewards credit cards can be a great way for consumers to not only boost their credit standing, but also earn cash back, points, miles and discounts to save money. But for all the benefits rewards credit cards can offer its members, they can also be dangerous if misused. Therefore, it’s important that consumers take a close look at not only the terms and conditions of their agreements, but also their own spending habits before taking on a rewards-bearing card.

Like any other type of credit product, rewards cards impose interest rates, fees and additional costs. However, rates tend to be higher for rewards cards and some lenders are more likely to impose an annual fee to carry the product, according to Business Insider. In addition, carrying a balance on a rewards card and incurring high interest charges may diminish the value of earned rewards. In addition, high interest rates can also balloon small balances into significant credit card debt over time.

Tacked-on fees may only add to this debt burden, and consumers should understand how a lender’s fee structure works before signing on to an account. While many issuers impose an annual fee, some may waive it for the first year. But even this can be costly the second year, especially if adults don’t use their card often. There are some lenders who do not impose an annual membership fee, so it’s important to shop around for these types of products.

Additional costs are not the only consideration consumers should keep in mind, but also whether the card will actually reward them. Some cards may require individuals to spend more than they normally would in order to take advantage of rewards. These types of cards can be useless to borrowers, either requiring them to take on more debt than they are comfortable with, or foregoing rewards altogether. In addition, some cards may impose expiration dates, rewards caps and other restrictions that further impede consumers from maximizing their benefits.

Rewards cards can provide significant savings and benefits to consumers, but like all types of credit products, it’s crucial to manage them wisely to avoid falling into debt traps.