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Thread: Reward Points vs. Lower APR

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    #1

    Reward Points vs. Lower APR

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    I have a credit card with a low APR (about 6-7%), but it doesn't have any rewards or anything.

    I have an offer with AAA that gives a great point system for cash back/gift cards.
    3x points for qualifying AAA branch and travel purchases
    2x points for gas, grocery, and drug store purchases
    1x points for all other purchases.

    But the APR for the AAA credit card would be about 13-15% APR.


    I pay my credit cards off pretty quickly but I recently made a large purchase (furniture) on my credit card that will take a year to pay off. If I decide to get the new credit card I would transfer the balance to the one with the higher APR to close the old one.

    With the rewards system I would plan on using the credit card more often for gas and groceries and pay it off at the end of each month like I do with my regular card.

    Would it be worth it to switch to the one with a higher APR but great rewards system since I pay off everything relatively quick?

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    #2
    If you pay it off every month, I would use the rewards. Use the other one for the furniture purchases.
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    #3
    If you are concerned about using your credit score in the near future for anything substantial, closing the old card would have a negative impact on your score because you would be closing an account you've had for awhile.

    Will the savings you get in the rewards out weigh the interest charges while you continue to pay off the furniture?

    If you really want the rewards, I would get that card to use for purchases that you make that you are going to pay off during the grace period. Leave the balance that you intend to carry for a period of time on the lower interest card.
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    #4
    Quote Originally Posted by LynnAFWife View Post
    If you are concerned about using your credit score in the near future for anything substantial, closing the old card would have a negative impact on your score because you would be closing an account you've had for awhile.Will the savings you get in the rewards out weigh the interest charges while you continue to pay off the furniture?

    If you really want the rewards, I would get that card to use for purchases that you make that you are going to pay off during the grace period. Leave the balance that you intend to carry for a period of time on the lower interest card.
    Well I have two credit cards, one with Navy Federal that I've had for 10 years so I'm not worried about closing the other one that I've had for 8 years.

    Navy Federal has the rewards also so I've been using that as my "everyday use/every month pay off" card. and my other card (Bank of America) as my "big purchase card".

    But witht the higher rewards with AAA I was thinking of switching and using Navy Fed as "big purchase" and AAA with everyday type purchases.

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    #5
    Quote Originally Posted by Skatie View Post
    Well I have two credit cards, one with Navy Federal that I've had for 10 years so I'm not worried about closing the other one that I've had for 8 years.

    Navy Federal has the rewards also so I've been using that as my "everyday use/every month pay off" card. and my other card (Bank of America) as my "big purchase card".

    But witht the higher rewards with AAA I was thinking of switching and using Navy Fed as "big purchase" and AAA with everyday type purchases.
    That makes sense then. Closing the BOA card may cause a short time ding since you've had it for a while, but I have to think that anyway you can get BOA out of your financial life has to be a good thing. But a 6 - 7% IR card is hard to give up!
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    #6
    Quote Originally Posted by LynnAFWife View Post
    That makes sense then. Closing the BOA card may cause a short time ding since you've had it for a while, but I have to think that anyway you can get BOA out of your financial life has to be a good thing. But a 6 - 7% IR card is hard to give up!
    So true!! I had a checking account with them but really was not happy with them so I closed the account but kept the CC. I love the low APR but hate that they don't have a rewards system.

    If I close that one and open up the AAA I'll have two cards with rewards points... still debating. Such a hard choice.

    I'm not worried about my credit number taking a dip for a while, not planning on buying a house or anything major for a few years.

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    #7
    I don't think points are worth such a huge increase in interest unless you are positive you can pay it off each month.
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    #8
    I have a flight rewards card that is 6%. I love it. I am nearly at my second free flight and I got in July. I treat it as a debit card though so I have never had interest. So I think they are worth it if you are careful with them.

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