Consider earning credit card rewards to be similar to running to a destination. Each step you take — each credit card purchase you make — brings you closer to redeeming that flight or putting that gift card in your wallet. Imagine you’re running on a treadmill that’s traveling backward. You’re working hard to achieve your goal, but you can’t seem to move ahead quickly enough.
Chasing credit card rewards while incurring debt is akin to running on a backward-moving treadmill. In general, excessive interest rates will overwhelm whatever rewards you earn.
A new Bankrate survey found that 44% of credit cardholders carry debt month-to-month. However, 67 percent of Americans with credit card debt continue to strive to maximize credit card benefits.
Sometimes credit card debt is unavoidable. This isn’t to say you shouldn’t earn incentives while you can, as long as you have a debt repayment strategy in place. However, spending money you don’t have solely to get incentives is not an effective method.
Key Insights
- Nearly one in three Americans are carrying credit card debt from month to month. That’s 34 percent of U.S. adults who typically carry a balance instead of paying in full.
- Most Americans who carry credit card debt still try to earn rewards. 67 percent of credit card debt holders make “every effort” or “some effort” to maximize credit card rewards.
- Higher-income cardholders are more likely to try to maximize rewards, but other income levels aren’t far behind. For instance, 77 percent of over $100,000 earners try to earn rewards, compared to 68 percent of below $50,000 earners.
2 in 3 Americans with credit card debt still maximize rewards
In January 2024, the percentage of people with credit card debt decreased significantly from 49 percent in November 2023 and 47 percent in July 2023. Nonetheless, 44 percent of credit cardholders are still carrying debt from month to month, so it’s worth considering how credit cards are utilized.
Just over two-thirds of Americans with credit card debt say they try to maximize their benefits, with 27 percent making “every effort” and 40 percent making “some effort.”
Credit card benefits typically include miles, points, or cash back. You normally earn as you spend, so you might save rewards for your next trip or a night out while making purchases you’d make anyway. With credit card interest rates at all-time highs, debt can quickly accumulate on delinquent balances. And it will most likely cost far more in the long term than that flight or lunch. — Ted Rossman | Bankrate Senior Industry Analyst
It’s worth mentioning that debt-free cardholders also seek benefits. 76 percent of consumers who pay in whole try to maximize credit card benefits. Credit card rewards can be beneficial if used responsibly and without incurring excessive interest.
Chasing credit card rewards isn’t limited by income
While higher-income cardholders are more inclined to try to maximize credit card benefits, other income levels aren’t far behind. Seventy-seven percent of individuals with yearly household incomes of $100,000 or more seek to maximize rewards, compared to 75 percent earning $50,000 to $79,999, 70 percent earning $80,000 to $99,999, and 68 percent earning less than $50,000.
While spending above your means to get rewards is not a good financial decision, it is worth analyzing whether lower-income cardholders gain more from rewards than their higher-income counterparts. Credit card debt may not always be an option; it might be the outcome of a difficult financial circumstance. And if a cardholder relies on a credit card to make ends meet, collecting rewards on top of their necessary expenditure isn’t bad.
Young adults and Northeasterners are more likely to maximize rewards
Overall, young folks are slightly more inclined to seek credit card perks. By generation, 77 percent of Gen Z cardholders, 74 percent of millennials, 69 percent of Gen Xers, and 69 percent of boomers go to great lengths to maximize benefits.
The Northeast also has a preference for rewards. Seventy-seven percent of Northeastern credit cardholders try to maximize rewards, compared to 71% of Southerners and Westerners, and 69% of Midwesterners.
Dos and don’ts
Dos
- If you have a credit card balance, it’s important to prioritize paying it off each month. As interest accumulates, the loan may soon become overwhelming. And no amount of gain will make up for that sacrifice. Missed credit card payments and high credit utilization might lower your credit score.
Common debt repayment strategies include:- Budgeting and cutting back spending
- Payment methods like the avalanche method and snowball method
- Debt consolidation loans
- Balance transfer cards
- Even if you have a repayment plan in place, you will still need to make everyday expenditures. Maximizing incentives as you go can be beneficial, as long as you avoid incurring new debt.
Groceries and petrol can be high-reward earning areas. A cash back card can provide incentives in the form of statement credits or checks, which can be used to repay debt. If you travel frequently for work or other reasons, a travel card can assist cover your next trip.
- It may appear paradoxical to apply for another credit card if you are already in credit card debt. A 0% introductory APR balance transfer card allows you to pay down your balance without incurring interest. This can be a smart option if you want to pay off debt rapidly while saving money on interest rates.Just bear in mind that once the introductory period is finished, the card’s APR will apply. To open a balance transfer card, a decent credit score may be required, along with a charge.
Don’ts
- To emphasize, it is not worthwhile to go into debt for rewards. Interest charges are likely to overshadow the monetary value of the rewards. And, while it’s one thing to make money by paying for necessities, it’s quite another to place purchases on a credit card that you cannot afford.Creating a budget is an excellent method to keep track of your costs and ensure that you are living within your means. For example, some budgeters follow the 50/30/20 guideline. This form of budget allocates 50% of your income to needs like housing and groceries, 30% to fun items like clothing and entertainment, and 20% to savings. If you track your credit card expenditures and discover you’re spending more than 30% of your income on wants, you may be overspending.
- If you want to better your financial status, you should monitor your credit. A good credit score can help you be authorized for lower interest rates and future lines of credit.
Every week, visit AnnualCreditReport.com to receive a free copy of your credit reports from the three major credit agencies. Additionally, some card issuers provide free credit score checking tools. Making on-time payments and reducing credit utilization may help you improve your credit score over time.
Methodology
Unless otherwise noted, all numbers come from YouGov Plc. The total sample size was 2,239 people, 1,740 of whom held credit cards. Fieldwork was carried out during the 24th and 26th of January 2024. The survey was conducted online. The numbers have been weighted and are typical of all US people (aged 18 and up).This survey was performed through an online interview with members of the YouGov Plc panel of people who have volunteered to participate in surveys.
Emails are sent to randomly selected panelists from the base sample. The email encourages them to participate in a survey and includes a generic survey link. When a panel member clicks on the link, they are directed to the survey for which they are most required, based on the sample definition and quotas. (The sample specification might be “US adult population” or a subset, like “US adult females”).
Survey invitations never expire, and respondents can be sent to any survey that is currently available. To ensure a representative reporting sample, the responding sample is weighted according to the sample definition’s profile. The profile is often produced from census data or, if not available from the census, industry-accepted data.