Maxed out my credit card for reward points and cashbacks. How bad is rolling over the balance?

Credit cards offer undeniable conveniences like reward points and cashbacks, but they are designed using psychological research to maximize bank profits. The credit card industry operates heavily on the 80/20 rule.

While 80% of users might pay their bills on time, companies make the vast majority of their profits from the 20% of users who default or only pay the minimum due. These users end up trapped in a debt cycle, paying very high interest rates of 24%-36% annually.

Maxing out a credit card for a 4% cashback is a terrible financial trade-off. Small, impulsive purchases, like a watch here or a gifted mobile phone there, can quickly get out of control.

Before you know it, your entire next month's salary is gone, leaving absolutely nothing for your 20% investment bucket. My approach is to clear that card balance immediately, even if it means cutting back drastically on your fun money for a few months, because no investment returns will reliably beat a 36% interest rate.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.