Cash back rewards look awesome from a distance. On television, credit card companies show you how – if you use their card – you will receive free money and soon be swimming in dollar bills.

But of course they don’t tell you some of the dangers of using cards that offer cash back rewards.

First, you’ll notice that cards offering cash back bonuses often come with higher interest rates. That means that every time you pay interest, you cut into any rewards you receive at a much faster rate (double or even triple) than the rate of rewards. You may get 5% cash back, but when you’re paying 10% interest the rewards get swallowed up by your monthly payment.

In addition, the credit card companies have started offering higher and higher limits to the cash back bonuses. While one company may give you 5% cash back for purchases up to $500, another company will raise that limit to purchases up to $1500.

But consumers often see that higher number and use it as an excuse to spend more, even when they may not be able to cover the cost. In the end, 5% of $1500 is only $75. If you pay more than $75 in interest, the benefits automatically cancel themselves out.

In general, you should use cash back credit cards the same way you use any credit card, no matter what the rewards: avoid all credit spending unless you can pay back the purchase immediately, thus preventing any interest payments. That means only using cards when you have the money in the bank to back up your purchase, and the discipline and self-control to keep your balance at 0.

Otherwise, go with debit or cash. Since they’re directly connected to your bank account, debit cards come with one big reward: a life of less debt!

If you are struggling with credit card debt that you can’t pay, our attorneys would be glad to speak with you for free about your options. Just give us a call at (901) 327-2100 or contact us through our website.