Credit Card Rewards, Rebates, Perks Cause Overspending

Credit card rewards make shopping look so attractive. Just swipe and you'll get cash back, gift cards, free airline miles and other perks. Do those perks justify overspending? Does dangling rewards lure shoppers to spend more than they can afford? Does the added credit card debt actually void the reward?

From personal experience, I'm nodding an emphatic "yes" to all of those questions. I'm a frugal shopper. I know every penny-pinching tip in the book. Yet even a tightwad like me got stuck in the credit card reward swamp. It was so easy, and I did it with the best intentions. I was trying to save money on get the best bargains for my family. That's how credit card rewards snag buyers, especially parents. They offer make buying too much and overspending look like the right thing to do.

My biggest traps were with store credit cards: Fashion Bug, Old Navy, Target Best Buy: all these stores offered tempting percentage-off coupons, stuff-and-save bags, rebate programs and cash-back rewards. At Old Navy, for example, I could buy $300 worth of clothes for about $80 using all the reward options.

Every time I swiped my card, I would get coupons: Buy $50 worth of merchandise, get $20, Buy one, get one free. Did my children need those clothes? Yes? Did they need the volume of clothes required to get the perks? Not always. No matter how good the bargains were, when I couldn't pay my balance off monthly, interest added up.

Like financial analyst Liz Weston says, "there's no credit card reward rich enough to offset the cost of carrying credit card debt. When you're carrying a balance, your primary concern should be getting the lowest possible interest rate so you can get out of debt faster."

It was the credit card rewards that actually caused me to fall into debt. If I hadn't been trying to earn enough rewards to get this or that item, if I hadn't felt compelled to take advantage of the credit card perks, my debt load probably would have been manageable.

Last year, I finally managed to pay off the $15,000 in debt and interest that I incurred. It wasn't all due to from overspending, but a significant portion was. In order to pay that debt off, I used Weston's plan: I paid down the highest interest rate cards first. As I got cards paid off, I closed all the accounts except two major cards I keep for limited use. Credit card rewards are a slippery slope; if spending is monitored, they're great. If not, rewards can be punishments.