Are Reward Points Worth A Higher APR?

Jared writes:

Dear Consumerist,

I was performing my new monthly task of calling all of my credit companies and asking for a lower rate. One of our cards is a Citi Premier Pass, which is part of the “Thank You” Network. We got the card for the balance transfer and for our honeymoon (they offer triple points for purchases on cruise ships) and in the end, we got $100 in Amazon gift certificates and a $10 Starbucks card – but I digress.

I asked the CSR last night if I was able to get a lower rate on the card. She pulled up my account information and told me that, no, we weren’t, because the card is already at the lowest rate possible, which is the 14.24% listed on the website. I asked her why that was the lowest rate, and she said that it was because of the rewards that the card offered.

My question is: do all rewards cause the APR of a credit card to go up, and if this is the case, is the points pay-off worth the higher APR?

~ Jared

Jared,

No, it’s not worth it. Reward points are for people who do not have a balance on their credit card. If you have a balance (and we’re going to assume that you do because you’re concerned about your APR) that should be your primary concern.

Get the lowest interest rate you can. Period. Then pay your balance off as quickly as you can. Carrying a balance on your card negates any “savings” you’re getting from the reward points.

If you have no balance on the card, then by all means take the card that offers the highest rewards, regardless of APR. If you’re not paying interest, why do you care what the rate is? Just make sure that you really will pay your balance in full, because reward points are intended to entice you to spend more than you can afford.

(Photo:el en houston)