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68% of millennials prefer credit cards that offer rewards—here's why that could actually cost them


It seems every week that credit card companies are upping their rewards, adding new perks and rolling out brand new cards.

That's likely because these companies know that Americans, especially millennials, like splashy credit card rewards. About a third of millennials (ages 23 to 38) say they find cards with 3% cash-back rewards most appealing, followed by 22% who would opt for cards with a $500 sign-up bonus. That's according to a recent survey by of over 2,500 adults, about 700 of whom were millennials.

Only 6% say a credit card with 0% interest on a balance transfer for existing debt most appealed to them. And yet, that's exactly the kind of card that would be most beneficial for many millennials. That's because about 43% of millennials say they're carrying a monthly balance on their credit card.

"I love using credit cards for the rewards and other perks, but carrying a balance quickly wipes away the value of any rewards you might earn," Ted Rossman, a credit card analyst for, tells CNBC Make It.

It's worse for those using a rewards credit card because these types of cards have higher interest rates, on average, than other types of cards, Rossman says.

Currently, the average APRs on cash-back and rewards credit cards are about 17.6%, compared to the average APR for a low-interest card of 14.73%.

"Credit card rates have never been higher, and many cardholders are paying around 20% on their balances," Rossman says. "You should eliminate your credit card debt before chasing rewards, so a 0% balance-transfer card would be a much better choice if you're in debt."

You may be paying off your credit card debt wrong—here’s the best way
You may be paying off your credit card debt wrong—here’s the best way

Why a 0% balance-transfer card may be better

Nearly half of U.S. adults don't know that 0% balance transfers exist, according to a separate survey from last year. These are credit cards that allow users to transfer an existing debt onto a new card and pay down that balance over a set period of time without accruing any extra interest.

The key is to look for a card that doesn't charge you a balance transfer fee and offers an extended 0% APR period. Ordinarily, cards that allow balance transfers can charge a fee of 3% to 5% to move your balance from one card to another, which can add up fast.

And you may not have to forgo the rewards forever. Once you pay down your debt and eliminate your monthly balance, you'll be able to spend toward earning rewards. For example, a credit card like the Amex Everyday offers a 0% APR on balance transfers for 15 months. But the card also rewards users with two points for every dollar spent at grocery stores and one point per dollar on all other spending.

"My advice to anyone who carries a balance — even occasionally — is that they need to prioritize their interest rate over rewards," Rossman says.

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