A card can give you points for buying something and charge you interest on the balance you carry from buying it. Both can happen on the same account. Looking only at the points leaves part of the purchase out.
I pay my balance every month and save my points for travel and hotel stays. In this week’s episode, I ask who pays for those rewards. For your own household, there is a place to start before looking at the whole industry: what did your card cost you while you were earning them?
Look at the interest and fees on your statements beside the rewards you actually used. If you carry a balance, find the APR that applies to it. A card may have different rates for purchases, transfers, and cash advances. The offer you remember from opening the account may not describe what is happening now.
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Paying by the due date and paying the balance in full are different things. The CFPB explains that many cards have a grace period on purchases. If you qualify for it and pay the balance in full by the due date, you can avoid purchase interest. Carrying a balance can mean losing that grace period, with interest also applying to new purchases. Cash advances generally work differently.
That is a term worth understanding before relying on a card’s rewards. A payment can keep an account current without making the borrowing free.
Understanding this does not tell me why somebody has a balance. There may be expenses or circumstances I know nothing about. I do not want to judge somebody from a statement. I want the person using the card to be able to see the terms clearly.
If there is something on yours that you don’t understand, start with that question. You don’t need to understand the entire credit-card industry before asking your issuer how a charge was calculated or which rate applies.
Bring the question into the community, without posting your statement or private account details. I would like to hear which part of a card agreement was hardest to understand and what finally made it clear.
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This is general financial education, not an individualized recommendation. Confirm the terms that apply to your account with your issuer.
Michelle