Credit card rewards continue to grow in breadth, variety and value. Many cards are willing to offer valuable benefits — including travel points, fuel discounts and even cash or gifts — in exchange for your use of their card, and those who make smart choices can really maximize their rewards in a way that benefits their financial standing.
So how do you make the most of your reward potential? Consider these nine strategies:
- Get organized. Gaining a strong handle on your finances is an important first step towards enjoying the rewards incentivized by credit card companies. Make sure you are organized, good at budgeting and self-control before applying for that top-tier card. If you’re not quite comfortable yet financially, start working toward getting organized by setting up automatic bill payments, automated savings deposits and paying down debt.
- Focus on rewards you’ll actually use. For instance, if you rarely travel, there’s no point in racking up a bunch of travel rewards points. Instead, focus on cards that offer rewards that are valuable to you personally. Not sure where to start? Consider a cash reward: Anybody can use extra cash, right? Use the Fifth Third Bank cash back calculator to determine how much you might earn back for various purchases.
- Use the right card at the right places. Some cards give you more cash back for certain types of purchases, such as dining, travel or gasoline. Other cards offer regular incentives, such as 5 percent back at home improvement stores in the springtime or 5 percent back on school supplies in the fall. Figure out which cards reward the types of shopping you plan to do with the card — and use the ones that offer the best rewards for each type of purchase. Apps like Smorecard and Reward Summit can keep up with the number of reward points offered for various purchases by each card and can recommend the best places to make certain purchases.
- Manage your miles and travel points carefully. Almost one-third of the billions of dollars granted in consumer rewards programs go unused each year, according to The New York Times. That means that while American households earn an average of more than $600 in rewards each year, about $200 of that is wasted. Rather than letting your rewards go unused, keep track of them and use them. Consider using an app that can help you track your points or even an old-fashioned spreadsheet. Remember that rewards can expire or lose value due to inflation, so it’s best to use them when they’re available.
- Don’t carry a large balance. If you carry a large balance from month to month on your credit card, you’re likely paying a significant amount of interest on top of the charges you’ve made. When that is the case, the value of any rewards you earn is likely to be mitigated or even canceled out by the extra charges you’re incurring.
- Watch for annual fees. If your credit card charges an annual fee, the value of your rewards can quickly diminish. For instance, if your credit card charges an annual fee of $50, and you earned 2.5 percent cash back on all purchases, you’d have to spend $2,000 a year on your card to break even.
- Look for signing bonuses. Some credit cards offer sign-up bonuses to attract new customers. These incentives may guarantee you a certain number of points or cash back on your first purchase or if you charge a certain amount during your first month or quarter. If you’re planning to make a large purchase with a new credit card, look for a card that offers a lucrative sign-on incentive to make the most of your purchase.
- Look for credit reward sites. A growing number of sites make it easy to earn additional rewards with your credit card. For instance, after you register your card with iDine, you automatically earn up to 10 percent back every time you dine out using that card. Similarly, register your credit card with UPromise and with every purchase, you’ll earn money toward college tuition (for yourself, your child or any individual with a qualified college savings plan).
- Meet your minimum spend as soon as possible. Most rewards cards require users to meet a minimum spending requirement before the rewards start kicking in. You can maximize your rewards by meeting that requirement as soon as possible. Do so by using the card to pay household bills, buy gasoline or groceries or other regular monthly expenses — and then promptly pay that balance off with the money you would have normally spent on those bills anyway.
With some diligence, planning and finance smarts, you can make your credit cards work for you by taking advantage of relevant incentives. Keep these 9 tips in mind when considering the credit card rewards program that fits your goals and desires.