Credit card rewards programs can be a great idea for some cardholders. If you use your card a lot then a good rewards program will give you cash back for every purchase, or points redeemable toward travel or merchandise through partnering merchants. Use your card, earn cash. Use your card, get an airline ticket. Use your card, get a bike. Sounds like a win-win situation, right?

Of course, it’s never that easy. Rewards cards sometimes have higher interest rates and extra fees, although a little diligence and perseverance on your part will probably result in you finding a nice rewards card without all the extra fees attached. If you have great credit, then it shouldn’t be tough to pull off at all.

So if you’re able to find a rewards card that doesn’t cost you any more than other comparable cards, what is the problem? Sometimes there is no issue with rewards cards; people use the cards, earn the rewards, and then cash them in for something useful. Other times, however, the rewards become a compelling factor for cardholders to spend, spend, spend.

Don’t use your rewards cards just for the sake of earning points.

You’re standing in line at the grocery store and you’re poised to pay with your debit card. It then dawns on you that by using your rewards credit card you will earn some points for the purchase. Your plan then becomes to use your credit card, but then go straight home and log onto your account so you can pay off the grocery trip.

“What an easy way to earn rewards!” you think, gloating about your cleverness.

The problem arises when you don’t pay off the purchase right away, and instead use the money that was earmarked for groceries in your checking account for something else entirely. Pretty soon you realize that all the grocery purchases, gas fill-ups, and little shopping indulgences you charged on your rewards card are all earning you rewards, but they are also earning interest…interest you have to pay.

The key to successfully using rewards credit cards is to keep everything in perspective. These cards are designed to compel you to spend more in an attempt to earn rewards. If you spend more than you can afford, you’ll carry a balance and therefore pay interest. When you compare the interest you pay to the rewards you earn, you’ll probably find that you would have been better off not using the card to begin with.

Not paying interest…now that’s a reward!

This is certainly not to say that rewards cards are evil. Quite to the contrary, a good rewards card can be quite a useful tool in the right hands. It’s much better to think of the rewards as perks or bonuses, and not as something that you should go out and earn. Once you get the idea in your head that you’re earning rewards by using your card, you’re poised to get yourself into some trouble.

A better frame of mind would be something like this: “How nice that the credit card company wants to give me small percentage of cash back for my purchases. I suppose that will add up eventually.” Try to think of it that way instead of, “I can earn free money from my credit card company! I’ll show those suckers…I’m going shopping!”

The credit card companies want you to get excited about the rewards they offer, and they want you to eagerly charge up purchases so you can earn more rewards. As far as credit card companies are concerned, in a perfect world you would shop like mad to earn points and then never cash them in.

Oh, and you would make minimum payments on that balance, too.

Find a good rewards card, but don’t get too wrapped up in the whole process of earning points and rewards. Don’t salivate over the potential reward points you can earn from a huge purchase, yet glaze over the fact that you can’t afford the purchase.

In other words, don’t fall into the Rewards Trap!

Related posts:

1. Are Credit Card Rewards Really All That?
2. Rewards Credit Cards: Are They Still Worth It?
3. Are Credit Cards Rewards Worth the Risk?
4. 8 Ways to Maximise Credit Card Travel Rewards
5. How much is your loyalty worth?