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The Problem with Cash Back Credit Cards

By Ruth Racey
Published: Saturday, February 27th, 2010

Credit cards are one of the most popular mediums of purchasing all the products that you will need. This is because of the fact that using credit cards has proven to be far more convenient than using cash. First, you do not have to bring all those cash whenever you are making your purchases. Also, you can actually purchase beyond what finances you actually have. In addition, there are also many discounts that you can avail whenever you use your personal credit card. 

One of such discount promos that credit card companies offers are cash back credit cards. In this case, you are actually getting credit cards that offer you discounts on cash backs, even getting discounts up to 4%. However, for you to get such discounts, you must be able to extensively use your credit cards in the first months. This is the reason why cash back credit cards may be even prove to be harmful rather than helpful, at least considering your financial account and your credit score

Remember that even though it is true that you may be having discounts in these cash back deals; the point is that you still need to pay for all of your bills using these credit cards. Also, you have to pay it with interest. In this case, whenever you extensively use your credit cards in most of your transactions, surely, you will witness your credit score to drop at a very unfavourable point. 

There are many determinants which may determine your credit score. Having large bills to pay for instance, or having a large balance, or paying your bills late, and even spending beyond your credit limit, all contributes to you having a low credit score. In this case, extensively using your credit cards in able for you to avail of the cash back discounts makes you have a huge balance, or worse, spending over the limit. In this case, surely, you will have your credit score hurt. 

Therefore, every time you are getting credit cards with cash back discounts, do not just be so comfortable in having a spending spree. This may actually result into having a bad credit score, making your discount without any sense at all. 

Remember that having a low score will surely hurt your finances. One thing is that you may actually be forced to pay for loans at a much higher interest rate. Also, low scores may actually make you have disapproved loans, because creditors and lenders would be very unwilling to lend to consumers who are not creditworthy.

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