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Consumer Smarts: 3 Things You Should Know About Your Rewards Credit Card

It seems everywhere we turn, there's a new credit card that's offering us some sort of perk. Whether it be extra points that we can use later to save some money or if you get some sort of cashback at the end of the year. At face value, they look like a good deal, but there are some things you need to keep in mind.


According to "Consumer Reports," these reward credit cards aren't always the best choice and you need to have some consumer smarts before opting to go this route.


In many cases, the cards that offer a reward perk come with a much larger interest rate and that can be a major problem especially for consumers that already carry a debt.


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"A card with more benefits might also have more costs," says Matt Schulz, senior industry analyst at told "Consumer Reports." He also said that not enough people understand that this is something that you need to consider when it comes time to apply for a card.


But, these cards aren't universally a bad idea, it can be great to save money or collect points that allow you to find cheaper airfare, hotel rooms or get a discount on movie tickets. They can actually be wonderful choices but there are three key things you need to keep in mind if you go this route.


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1. Call and ask for a lower rate

One of the best things any credit card owner can do, whether you have a traditional bank credit card or one that comes with rewards, is call the company and ask for a lower rate. The worst thing they'll say is "no," but Schulz told "Consumer Reports" that often the company does issue a lower rate. According to him, his company discovered that 78 percent of consumers who did call to ask for a lower rate were successful, but less than 25 percent of card owners actually make the call.


2. Be realistic, does the rate outweigh the perk?

According to NerdWallet, the average rewards credit card carries a high annual percentage rating of 18.83, which is higher than an average credit card. If you're going to be carrying a balance on your card each month because you can't pay it off in full, that's something you need to keep in mind. Also, shop around for reward cards that have lower interest rates, like airline reward cards.


3. Reduce debt before applying

"Consumer Reports" says that your credit score plays a large role in the rate that you're offered when you're issued your rewards credit card, or any credit card. If you really like the idea of the rewards you'll be getting, make sure you reduce your debt and improve your credit score before applying and you will have a better chance of having the perks outweigh the interest on the card.


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