Personal Finance Lecturer Dorothy Kelly reveals the biggest mistakes people make when shopping for a cash-back credit card in a recent WalletHub story titled “Cash Back Credit Cards.”
“A common and costly mistake is signing up for a cash-back credit card to take advantage of an initial bonus offer, perhaps with the thought of canceling the card in the future,” Kelly says in the story. “Offers such as ‘earn a $200 bonus after spending $1,000 in the first three months’ are designed to encourage consumers to sign up for a card and spend, rather than save or invest their hard-earned money. Canceling a credit card negatively affects an individual’s credit score, which determines the interest rate he or she will pay on loans, mortgages, and credit cards.”
Another common mistake, she adds, is to use the rewards to rationalize unnecessary spending.
“Consumers should evaluate all the alternatives and think about the long-term consequences of their options.”