A new study by the Federal Reserve Bank of Chicago shows that cash-back reward incentives on credit cards usually cause more spending, more debt, and very little reward. The study found that a one percent cash-back program on average increased spending by $68 per month, debt by $115 per month, and only yielded a reward of $25. They might save a little bit of money, but on average, they end up with much more debt than reward out of the deal.
Does this mean that cash-back credit cards are bad? No, cash-back rewards shouldn’t solely be blamed for increased spending and debt. The trick is to use the credit card as you normally would, stay within your budget, and not spend more just because you have a rewards program. After all, what is the point of getting cash back if you never even get to see that money?
To learn more about responsible credit card usage, check out http://blog.mycreditspecialist.com, and go to http://www.mycreditspecialist.com for a free credit evaluation.
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