‘No such thing as a free lunch’: Here’s why experts are questioning new DoorDash rewards credit card

Chase is making it easier for consumers to spend money on fast food, announcing a collaboration with DoorDash this week, and launching a rewards Mastercard that will net food delivery devotees big rewards. But financial experts are questioning if 4% cash back on direct-to-consumer dining is absolutely necessary.

“There’s no such thing as a free lunch, even when it’s delivered without a fee,” news and business website Axios reported after the DoorDash/Chase announcement. “The Fed’s monetary-tightening offensive is pushing up borrowing costs — including annual percentage rates, which recently set a record above 19%. For consumers who don’t pay their balances in full every month, the costs can really add up.”

Proffering an unlimited 4% cash back on DoorDash orders, 3% on restaurant dining, 2% on grocery stores, and 1% on all other purchases, the new Mastercard includes a free year of DashPass and a $100 cash bonus after spending $500 on purchases in the first three months. But those cool perks don’t come cheap, Axios reported: The DoorDash-Chase card’s APR carries a variable rate between 19.49% to 28.24%.

Credit cards “are like power tools,as in, they can be really useful, or they can be dangerous. It all depends on how you use them,” Ted Rossman, senior industry analyst at Bankrate, told Axios. “Credit card rewards tend to be more generous than their debit counterparts.”

According to a Bankrate survey, only 54% of cardholders pay their balances in full each month. “For them, life is great,” Rossman said, adding that the other 46% should prioritize low interest rates “rather than chasing rewards.”

Mostly because Federal Reserve data shows that total household debt rose by $394 billion, or 2.4%, in the last quarter of 2022 and there’s been an uptick in the number of people struggling to make credit card payments. Travel points, cash back and other credit card perks will not help close that gap.

Still, banks and brands defend the tactic.

“We do not ever want someone to get into trouble with a credit card,” Ed Olebe, president of Chase co-brand cards, told Axios, noting the banking giant was not trying to incentivize overspending with its DoorDash partnership.

The new card is “a better tool if you already use DoorDash” and helps drive loyalty for customers who “want options and value,” Olebe said.

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