New Rewards Cards Tempt Consumers into More Credit Card Debt in Chicago
Credit card issuers are increasingly trying to lure customers back with rewards cards, reports The Chicago Tribune.
But while the cards may come with perks, they don't come with the greatest interest rates. And as our Chicago bankruptcy lawyers point out, that can lead to trouble for Illinois consumers.
Credit card companies mailed out 37 percent more offers last year than in 2010. Most of those solicitations were sent to people with the highest credit ratings.
The Tribune article looks at the best rewards cards for Illinois students, who are typically excluded from offers because of either their lack of credit history or large amount of debt.
But maybe it's a good thing that it's more difficult for young people to qualify for a good rewards card.
While the cards may seem like a boon for customers, they're really just a marketing tactic for banks, who are looking for new ways to sign up cardholders after several years of tightening credit.
Most rewards cards offer 1 percent back on purchases, while the very best cards offer 5 percent back for specific categories like gas and groceries.
For consumers who pay their balance off in full each month, it's a nice little discount - assuming you're buying things you would have purchased anyway.
But in the real world, many people don't pay their balances in full.
For young people struggling with student loans and low-paying jobs, it can be especially tempting to carry a balance. All it takes is one late payment and rewards can easily be whittled away by fees, leaving a high interest rate and no benefits.
Chicago consumers are better off finding the card with the lowest rate, not the best rewards - no matter how appealing those rewards may seem. And if spending is out of line with income, consumers are always better off using cash and paying down existing credit card debt. Chicago bankruptcy can help.
The longer young borrowers wait to deal with their credit card spending, the harder it will be to climb out from under the pile of debt. Filing for bankruptcy in Chicago is a guaranteed way to legally relieve unsecured debt, paving the way for a brighter financial future.
If debt has led you down a dead-end street, a financial professional can help you determine whether bankruptcy is the right solution.
More Blog Entries:
Top Causes of Consumer Debt in Chicago: February 15, 2012
Students Rewarded for Good Credit Behavior, Carolyn Bigda, The Chicago Tribune