Why Cash Back Credit Cards Are Bad For Society

Have you ever wondered if cash back credit cards are good or bad? What if I told you that these cash back rewards are actually a scam and it’s causing our country to be trillions of dollars in debt. In this article, we’ll show you why cash back credit cards are bad for us all.

How Cash Back Credit Cards Work

Let’s start with the basics!

Cash back credit cards are a type of credit card that offers you a certain percentage of your purchase back in cash rewards.

For example, if you spend $100 on your credit card and it has a 2% cash back reward, you will receive $2 back as a reward.

Sounds pretty good, right?

But here’s the catch: credit card companies make money off of the interest they charge on your purchases.

So, while you may be getting a few dollars back in rewards, you’re actually paying much more in interest.

This is just one of the reasons that cash back credit cards are bad.

The Problem With Using Credit Cards

According to a study done by the Federal Reserve Bank of Boston, people tend to spend 160% more when using credit cards as opposed to cash.

Why is this?

Well, when you use cash, you physically see the money leaving your wallet.

This makes you more conscious of how much you’re spending and can prevent overspending.

However, with a credit card, it’s just a swipe and the money doesn’t even come out of your bank account right away.

This disconnect between spending and seeing the consequences leads to people overspending and ultimately relying on credit cards to make ends meet.

This creates a dangerous cycle of debt and is a major problem with credit cards in general.

But there’s an even bigger reason why cash back credit cards are bad for you.

The Scam Behind Cash Back Credit Cards

Not only are these cash back rewards causing people to spend more money than they actually have, but credit card companies also charge high interest rates on balances that are not paid off each month.

The average interest rate for credit cards in the United States is a whopping 23%.

That means if you have a balance of $6,000 on your credit card and only make minimum payments, it could take you three years to pay off and you will end up paying over $2,000 in interest alone.

Yikes!

So why do credit card companies offer these cash back rewards if they’re ultimately making more money off of the interest?

It’s simple: to entice people to use their credit cards and spend more money.

By offering a small percentage back in rewards, they make it seem like you’re getting something for nothing.

But in reality, you’re actually paying much more than what you’re receiving in rewards.

But here’s where the scam really comes into play.

The United States is currently in over $1 trillion of credit card debt. That’s right, TRILLION with a T.

And a big part of this debt is due to the use of credit cards and the allure of cash back rewards.

You see, when people spend more than they can afford, they end up relying on their credit cards to make ends meet.

And with high interest rates, it becomes almost impossible to pay off the full balance each month.

This leads to a cycle of debt that can be hard to break free from and is another reason cash back credit cards are bad.

If you think that’s shocking, you’ll be floored by this next bit of info.

Where Cash Really Back Comes From

Even if you are one of the few who pays off your credit card balance in full every month and receives cash back rewards, there’s still a big problem.

A portion of that cash back is actually coming from someone else who is paying high interest rates on their credit card balance.

So in a way, you’re profiting off of someone else’s financial struggles.

It’s a lose-lose situation for everyone involved, except for the credit card companies.

They make money off of both the rewards they offer and the high interest rates they charge.

And let’s not forget, they’re the ones who ultimately benefit from people being in debt.

After all, when you’re in debt, you owe money to someone and that someone is usually a bank or credit card company.

So why do we continue to fall for this scam? It’s simple – we live in a society that promotes instant gratification.

We want things now and we’re willing to pay for it later.

Credit cards make it easy for us to get what we want, even if we can’t afford it.

And the promise of cash back rewards only adds fuel to the fire.

The Alternative to Cash Back Credit Cards

But there is hope. It’s not too late to turn things around and break free from the cycle of debt caused by cash back credit cards.

The first step is becoming aware of the problem and understanding that these rewards are not as beneficial as they may seem.

From there, it’s important to create a budget and stick to it.

This will help you become more conscious of your spending habits and prevent overspending.

So what can we do about it? It’s never too late to turn things around.

If you’ve found yourself in an endless cycle of credit card debt or living paycheck to paycheck, there are steps you can take to break free from this trap.

We’ve put together a free eBook with seven practical steps that have been proven to help people get out of debt and start building wealth.

Another helpful tip is to switch to using cash or debit cards instead of credit cards.

By physically seeing the money leave your account, you’ll be more aware of your spending and less likely to overspend.

Conclusion

While cash back credit cards may seem like a good deal at first glance, they are ultimately a scam that leads to individuals being in debt and contributes to the larger problem of our country’s debt.

So next time you’re tempted by the allure of cash back rewards, remember the real cost behind them and make a conscious decision to stay away from using credit cards.

Your financial well-being will thank you in the long run.

So be smart, be aware, and don’t fall for the cash back credit card trap.

On a brighter note, there are other ways to save money without relying on cash back rewards.

For example, creating a budget and sticking to it, finding deals and discounts, and using coupons can all help you save money without the risk of falling into credit card debt.

If you’d like to learn about more ways to make and manage money, feel free to visit our resource center!

Frequently Asked Questions About Cash Back Credit Cards

Q: What is a cash back credit card?

A: A cash back credit card is a type of credit card that offers a percentage of your purchases back in the form of cash rewards.

Q: How do I earn cash back with a cash back credit card?

A: You can earn cash back by using your credit card for purchases. Each time you make a purchase, a percentage of the total amount will be added to your cash back rewards balance.

Q: How much cash back can I earn with a cash back credit card?

A: The amount of cash back you can earn depends on the specific credit card and its rewards program. Typically, it ranges from 1-2% of your purchases.

Q: Are there any downsides to using a cash back credit card?

A: Yes, there can be downsides to using a cash back credit card. These include overspending and relying on credit cards for month-to-month expenses, as well as paying high interest rates if you carry a balance.

Q: Can I use my cash back rewards to pay off my credit card balance?

A: Yes, you can use your cash back rewards, however, it’s important to note that using this method may still result in interest charges if you carry a balance.

Q: Are there any other types of credit card rewards besides cash back?

A: Yes, there are various types of rewards offered by credit cards, such as travel points, airline miles, and store discounts.

Q: How can I avoid falling into the trap of cash back credit cards?

A: To avoid falling into the trap of cash back credit cards, it’s important to have a budget and stick to it, prioritize paying off high-interest debt, and educate yourself on financial literacy.

Q: Where can I find resources for managing my finances and getting out of debt?

A: You can find helpful resources online or through financial institutions such as banks or credit unions.

Additionally, seek out advice from a financial advisor or attend workshops and seminars on financial literacy.