8 Ways to Make the Most of Your Rewards Credit Cards
Many people are able to travel several times for free, earn several dollars or redeem gift checks just by using their credit cards in their purchases. It’s amazing how this small plastic card is letting you buy things without physically shelling out money up front, and then let you earn you some fantastic rewards in the form of miles, cash-backs, gift checks and more. It’s safe to say that you can earn some while you spend some just by responsibly using your credit card.
But rewards credit cards aren’t all the same. It pays to scrutinize your card deeply, know what it can do and offer you, and as well be responsible in using it so you can get the best bang from your buck! And you probably already know that irresponsible use of credit cards (overspending, maxing out the credit limit and late payments) can lead to serious financial consequences down the road.
But still, it doesn’t mean that you should totally ditch your cards, especially if you’re enjoying some of the best perks from it. Instead, you want to use your card in every possible way that brings positive impact to your life and finances. And this is why you should use your rewards credit card properly and smartly.
What are Rewards Credit Cards?
A reward credit card is a type of card that you can use just like any other credit card, but at the same time allows you to accumulate rewards which you can redeem in the future. It basically allows you to obtain a reward for every dollar you spend using the card. The more you use and charge your purchases towards your credit card, the more rewards you can enjoy.
There are several types of rewards credit card, but most of them fall in one of these three categories: points, cash, and miles.
Types of Rewards Cards
Miles Credit Cards – these are credit cards that earn you miles as you use them. When you’ve accumulated enough miles on these cards, you can start redeeming your free flights. These cards may be co-branded by a specific airline or offered by your bank or credit issuer. It’s an ideal card to have if you’re a frequent traveler, whether for business or leisure and help you save money on airline tickets.
Points Credit Cards – using these rewards credit cards allows you to accumulate points for every dollar you spend. For instance, your card gives you one point for every one dollar in your purchase. The more you use this credit card, the more points you get. Points are pretty flexible as rewards because they may be converted into cash backs, miles or redeemed as gift cards.
Cash back Credit Cards – cash backs are essentially rebates which are the most straightforward forms of rewards nowadays. It works by giving you some of your money back as you use the card. The cash backs may be deducted from your credit statement, or you may redeem it as gift cards. Cash backs are also available when you shop in specific stores affiliated with your credit issuer.
Proper Card Use
Owning credit cards with some rewards system attached to them aren’t just luxuries; most people think it’s a necessity. According to www.creditcards.com statistics in 2015, 86% of their respondents say that their cards came with rewards features. Additionally, more than half say that they like their cards best for the rewards they get.
Suffice to say, rewards are compelling features that compel a potential cardholder to sign up and stay loyal with their credit issuer. “Banks have strong incentive to keep customers happy with their rewards. People who like their cards’ reward programs tend to spend more on them,” says www.creditcards.com.
Like any other credit card, it is important to remember that rewards credit cards need to be managed responsibly, not just to maximize your reward-earning potential, but also to keep your finances in check. Here are the best and savvy ways to make the most of your rewards credit card.
Getting the Most out of Rewards Credit Cards
Charge everything to your card
Credit cards are excellent forms of currency in a variety of ways. First, they’re handy and convenient. You’re also able to track your spending by pouring through your credit statement and online banking account. Importantly, you can build your credit score fast by using credit cards wisely.
Credit cards also allow you to earn some while you some. The basic and only way to earn rewards on your card is to use the card. whether you’ve decided to sign up for the card because of the rewards or any other reason, if you expect to see miles or cash or points rolling in at the end of the month, you should be using your card. And if you use your card for everything, then you would be accumulating rewards rapidly and more aggressively.
For instance, if your card allows you to collect 1% of cash backs or points, charging your credit card $1000 each month gives you 1000 points or $10. Some cards even allow 2-5% cash backs when you use them in stores affiliated with your credit issuer, giving you more than double of cash back into your account. So if you spend using your card in basically any purchase possible, you can start seeing those points and cash accumulate generously.
Align your card with your interests
it is unwise to decide on a rewards card based on its promotion or introductory offer or brand. More than anything, you need a card that fits your spending lifestyle.
As you know, there are different types of rewards credit card. The cards that you own should give you rewards based on your spending. If you’re a frequent traveler, it makes sense to own a rewards card that gives you miles or cash back that you can use to purchase airline tickets. If you spend a lot of money on daily commodities like groceries, food, and gas, then having a point or cash back rewards cards are your best option.
You also need to nail down your interests a little further. If you want to get miles as rewards but you’re not loyal to one airline’s company, then pick a general miles card than opting for a brand-affiliated card that you don’t even patronize. You could use this card to avail other travel-related expense, like taxi fares and sweet hotel room upgrades.
However, if you do a lot of shopping at one store more than the others, a brand-affiliated rewards card should give you most points. Even huge online stores like Amazon can give you deep rewards if you shop there often.
With that said, owning a rewards credit card doesn’t mean that you should splurge and indiscriminately spend on “things that interests you.” If the only reason why you’re charging your credit card is to earn miles, even if these purchases are already hurting your pockets, then you’re just defeating the very purpose of gathering rewards. Stick to what you can realistically afford without going over the budget and end up getting into debt.
Shop around for the best deal
Many people find it easier to apply for a credit card now than before, and enticing introductory rates and promises of rewards can make them get a credit card on impulse. It’s not enough to decide on one miles rewards card just because you are a jet-setting card holder. When you compare one miles rewards credit card to another from a different brand or issuer, you start to see the stark differences.
Take into consideration sign-up bonuses and annual fees. Rewards credit cards typically have higher interest rates and annual fees than regular ones, so if you’re looking to save some money, take your time shopping around. Some companies do waive the annual fee on your first year while others require you to earn the minimum points within a period of few months. Make sure to understand these carefully before picking a card.
Never let your points expire
So you’ve diligently charged your credit cards, the rewards are piling up but along the way, you forgot when they expire.
Unfortunately, the TD Bank has found that approximately one-fifth of the cardholders have left their cards’ rewards to expire, which in essence, is like leaving money on the table. BankRate also found that around 31% of the surveyed cardholders have admitted that their rewards have expired. According to Robin Saks Frankel, their credit card analyst, “Credit card rewards don’t gain value over time. Why have a rewards card if you’re not going to use the rewards?”
Also, www.creditcards.com says that you either redeem or lose the rewards for good. Expiration periods can vary from issuer to the next, but most of them are redeemable within a 12-18 month period. Others can go as long as 24 months. Unfortunately, if you failed you to redeem your rewards within this period, your points are forfeited, although some credit issuers may allow you to purchase those points back. Doing so defeats the very purpose of having a rewards card, though. The rewards won’t feel that rewarding.
If you’re unsure about when your rewards expire, go back to the fine print and look it up. Visit your credit issuer’s website or ring them up. Importantly, make sure you use your rewards before they expire.
Focus on using one card at a time
If you own multiple credit cards, there’s a good chance that you’re using one or two of them more than the others. It’s also likely that you’re not using some of them at all.
Now that you’re aiming to accumulate as many rewards as you can, pick a rewards credit card that you can use as often as you can. Find all the possible ways to charge purchases on this one card so it racks up rewards more quickly. For instance, you may be able to charge your car’s down payment and utility bills on the card, which does help speed up the rewards-building process.
But don’t think that this is a good excuse to spend on the unnecessary things. It only encourages you to put your expenses on the card instead of using cash or any other payment method because the rewards will soon come. Of course, you still need to watch your spending and make sure that you can afford the credit card payment each month.
Get rid of bad cards
You might think that you can spread out the purchases (and rewards) to a couple of credit cards. It’s not such a bad idea to own multiple cards, but if you want to keep the momentum of racking up rewards after rewards, you should consider getting rid cards that don’t bring as many rewards as you first thought.
In the website www.thepointsguy.com, it was suggested that you get rid of the card which brings more cons than pros. Sure, it’s lucrative to own a card that gives you nice traveling perks like lounge access and priority boarding, but if you’re almost always home and so seldom travel, that card might be costing you more on annual fees than the potential to generate as many rewards. Again, such a card just doesn’t fit your spending lifestyle.
Additionally, consider cutting up the card that you just don’t use at all or if you get the same rewards from another card that you use more often.
Rewards are great when you’re able to get them in a strategic way – one that gives you more benefits than the costs. Owning a credit card doesn’t come for free. You need to deal with annual costs, late fees and of course, your monthly billing cycle. If you have too many cards to deal with and find that some of them aren’t bringing in the rewards, then it’s high time to consider giving them up. Focus on using the cards that are most beneficial to you.
Don’t miss payments
Missing payments is a very crucial mistake you should try not to make – not on your loans, debts and even your rewards credit cards. You may be able to get away with one missed payment, but if this happens quite more than often, it would impact a lot of things in your financial life.
First, missing payments on your credit card lead to debt. Some people think that paying the minimum amount is good enough, but that’s also a tell-tale sign that you can’t afford your purchases. Focus on paying the bill in full and on time each month. If you think the expense is too big that you’ll struggle to come up with the payment, delay it until you know you can afford it.
Second, missing payments can wreak havoc on your credit score. Your credit score could drop by several points, leading to uglier consequences. Your credit issuer may reduce your credit limit or increase your interest or both. Importantly, a poor credit score may hinder you from getting good deals on financing in the future.
Credit issuers are there to entice you to spend because that’s how they make money. Unfortunately, you also lose money the very same way. The only way a rewards credit card can serve you is to make sure you keep your expenses within your means.
Keep track of any changes to your terms
You’ve probably received an email from your credit issuer at one point or another, only to dismiss it as a boring newsletter sent to cardholders like you. But if you’ve only taken a minute to read the content, you might realize that it was notifying you of some pertinent changes to your credit card rewards terms.
If you’re very keen about accumulating as many rewards possible, not knowing these changes can hurt, if not shock you. You probably expect to have gathered a lot of rewards already, only to know that credit issuer has reduced its cash back percentage or points on some purchases.
Don’t be left behind with such information. Read through the fine print of every email that’s sent to you so you are up-to-date. If you’re no longer happy with the terms on your rewards credit card, it might be time to shop for a new one.
It’s nice to have a credit card that you can use for purchases, and at the same time expect some rewards just by using it. If some people are able to purchase domestic flight tickets without even shelling out a single dollar just by using a rewards credit card, why can’t you, right?
However, there’s more to rewards credit cards than meets the eye. You need to fully understand how they work so you can make the most from them. Also, it pays to be vigilant with your spending by sticking within the acceptable utilization ratio, paying the bill in full before it is due and making sure that you can afford such expenses. Otherwise, the rewards you reap would seem less valuable and the card would end up costing you more.
Cary Silverman is a consummate entrepreneur having sold multiple companies during his 20 years of business experience in the financial industry, but for him, it isn’t about the money. His success is rooted in his passion to focus on doing something better today than it was done yesterday. These days, he’s the CEO of Waldo General, Inc. that oversees the operation of King of Kash.