Are credit card rewards programs worth the hassle—or the cost? It all depends on you and the rewards you want. For example, airline miles can be difficult to redeem, with blackout dates, limited seats, and inconvenient flight times being just a few of the challenges. Comparably, hotel and merchandise points are relatively easy to earn and redeem, as are cashback rebates. At the same time, it can be easy to get carried away by reward-earning potential while you spend—so it’s important to use your card responsibly. Below are a few tips to consider about your credit card’s rewards points:
Get the right credit card
There’s no one-size-fits-all credit card, so it’s best to ensure you’re using a card that pays back in rewards that match your spending.
For example, cash back is a straightforward way to earn rewards on your card. The redemption process is simple—you can redeem cash back for statement credits or direct deposits to your checking or savings account. If you’re a frequent flier, a card that earns you airline miles may be a better option.
Or, if you want more flexible redemption options, a points card is a great choice. You can cash in your points for gift cards, merchandise, travel purchases, like flights or hotels, or other entertainment, like concerts and sporting events.
Finding a card that works best for your spending is crucial to maximizing your rewards.
Understand your credit card
You need a clear and detailed understanding of your credit card’s rewards program. Many programs set minimum spending requirements each month before points can be earned, while others have minimum redemption requirements.
Miles sometimes can only be redeemed on one named airline. Big cashback advertisements may be for a limited time or restricted to specific shopping categories. Each program is different and unique, so heed the small print.
There are also credit card terms to consider. Rewards credit cards typically have a higher APR than a non-rewards card, so make sure you can pay your statement balance each month. If you can’t, the cashback bonus won’t dent the interest you’re accruing. And some credit card companies charge a hefty annual fee.
Don’t be tempted to overspend
If you’re spending money—which you probably are—why not get something in return? Credit card rewards points are an excellent option for consumers who love to travel, can be flexible, and are organized enough to keep track of offers and deadlines. The points that can be redeemed for cash are even better! But it’s crucial to keep your spending in line. While increasing your spending to earn more points may be tempting, remember to spend within your means.
Stick to a budget so you aren’t spending more than you can pay off monthly. Generally, you never want your minimum credit card payments to exceed 10% of your monthly income. You also want to keep your credit utilization below 30%—a high utilization rate shows lenders you may be unable to pay your bills on time.
Maximize the benefits
To make the most of a rewards program, you should plan to use your credit card frequently—you should also try to maximize the benefits. You don’t need to change how you spend. Still, it doesn’t hurt to be aware of your credit card’s rewards categories—especially if you use multiple credit cards.
For example, many travel cards award more points for dining out. You may want to use that card next time you treat your family to dinner or for your morning coffee run to get you closer to paying for your vacation. Some credit cards also offer rotating bonus categories, either monthly or quarterly, so keep an eye out for those, too.
Ask any group of people why they chose a given credit card, and most will say the rewards reeled them in. For some consumers, they work. For others, they sound too good to be true. But understanding the details and your spending habits will help you choose the card that best suits your needs and maximize your reward points.
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