Credit card rewards can be a nice perk on your everyday spending, but some Americans may lose them due to credit card interest fees. According to a new NerdWallet survey of more than 2,000 U.S. adults conducted online by The Harris Poll, 21% of Americans have used a credit card to earn rewards in the past 12 months despite having credit card debt.

But here’s the thing: Credit card debt is expensive, and you’ll likely spend more on interest than you earn in rewards if you carry a balance.

Let’s say you get a new credit card with rewards which offers 2% cash back on your spending. You charge $1,000 per month, but only make monthly payments of $500. Your interest would exceed your rewards in six months. If you instead spent $1,000 but only made $50 in payments, it would only take four months for the interest to exceed the rewards.

According to the survey, about 1 in 6 Americans (16%) opened a new credit card to take advantage of a sign-up bonus in the past 12 months. Sign-up bonuses on credit cards are usually earned by spending a certain amount of money over a set period of time, and they can be worth over hundreds of dollars. But if cardholders taking advantage of these bonuses have a balance, the bonus may not even be worth it.

That’s right, a large sign-up bonus will exceed the accrued interest for much longer than the ongoing rewards. However, if the purpose of the sign-up bonus is to use it to get a free trip or cash back, carrying a balance degrades the value of the sign-up bonus and may eventually outweigh it if you continue to have revolving debt. .

Let’s use the example above and assume a sign-up bonus of $500, which is quite high. If you spent $1,000 per month and made monthly payments of $500, your interest would exceed the bonus and ongoing rewards in just 13 months. This would happen even faster if you only made minimum payments. And since this sign-up bonus is generous, there’s a good chance the card comes with an annual fee, which we’ve ignored in this illustration for the sake of simplicity.

About a third of Americans (34%) say they have strategically used a credit card to earn rewards in the past 12 months. Whether you’re trying to earn miles for an upcoming trip or earn a little extra cash on purchases you were already going to make, using a credit card to earn rewards is a smart move, but only if you can afford the balance each month. .

One tip to avoid running up a balance too high to pay off each month is to not use a credit card for spending categories that you have trouble controlling. So if you tend to overspend on something specific (clothing, hobby supplies, restaurants), try using cash or debit to control that budget category.

If you currently have credit card debt, it’s a good idea to pause your card spending until it’s paid off. The math of rewards probably won’t work in your favor anyway, and it’s easier to tackle your debt if it doesn’t continue to grow.

This survey was conducted online in the United States by The Harris Poll on behalf of NerdWallet from October 1-3, 2024, among 2,090 American adults aged 18 and older. The sampling accuracy of Harris online polls is measured using a Bayesian credibility interval. For this study, the sample data is accurate to +/- 2.5 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the population of interest surveyed. For full survey methodology, including weighting variables and subgroup sample sizes, please contact (email protected).

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