Strategy for getting the most from your rewards Credit Cards
By: Elizabeth L., Published: May 11, 2020 | Related: Credit Cards Benefits
Credit card rewards programs can offer cardholders a wide variety of very valuable perks and bonuses, depending on how you use them. If you are not careful with how you use them, however, you can actually negate the bonuses they provide. Getting the most out of your rewards cards depends on using them wisely and developing a specific strategy for using them. Here are 5 tips on how to get the most from your rewards cards.
Try and avoid carrying a balance
Rewards cards will often carry higher interest rates than non-rewards cards. This offsets the costs of the rewards and credit card companies generally come out ahead, which is why banks continue to offer them. You can still get all the benefits without offsetting them in the interest you are paying by simply paying off your balance each month. That way, you come out ahead instead of the bank.
Be on the lookout for sign-up bonuses
A number of different rewards cards will offer you hefty bonuses for initial sign up. While this is a great way to earn rewards points, you also need to be careful about how many cards you sign up for and how often. Signing up for too many cards can make it more tempting to overspend. In addition, the more cards you have, the more disciplined you need to be about budgeting carefully and paying all the bills on time to avoid late fees and penalties.
Be careful of a practice known as "churning" as well. This is when people sign up for cards to garner the attractive sign-up bonuses and then cancel the card once they have reaped the rewards. These cancellations can damage your credit as can having too many cards with too high of a credit line in proportion to your income.
Spend according to the available bonus categories - but spend carefully
Rewards programs will often offer bonuses on certain types of spending at different times of the year. You can plan out your spending to align with these bonuses, but be careful not to purchase items you would not otherwise purchase just to get the bonus. If you spend $100 on an item you would not otherwise purchase just to get the 5% cash back bonuses, you haven't saved $5, you've spent $95.
Take advantage of your card’s benefits
Many cards offer a wide range of money-saving benefits. These can include perks like additional insurance coverage on rental cars, savings on travel, extended warranties and a wide range of purchase or price protection features. Make sure you know all the features your card offers and take advantage of them.
Use the right card for the right kind of purchase
One of the best ways to take advantage of rewards is to use the right card for daily purchases you are going to make anyway. If you have a card that offers airline rewards miles for all purchases, you can use your card to pay all your bills and rake in rewards miles for doing it. Some cards may offer cash back on grocery or gas purchases, while another offers rewards on travel expenses. Keep in mind, you don't have to actually use all your cards daily to reap the rewards.
You may keep a travel rewards card open and only use it for travel purchases, while using a cash back card for all your daily expenses. Some cards simply offer perks instead of rewards, so you can also keep a card open just for that purpose. For instance, you may hold a card for an airline you use frequently because it offers priority boarding or free checked bags.
With some careful planning and discipline, you can maximize your rewards while minimizing the additional costs of rewards cards. Be on the lookout for banks that offer multiple types of rewards cards as well as cards that allow you to pool rewards between family members. When you use cards on the same platform and have points left over on one card after claiming a reward, but not enough on another card to take advantage of a certain reward, some banks will allow you to move points from one type of card to another.