A rewards credit card can be a valuable part of any financial strategy, as transactions give you the opportunity to earn points towards “rewards” with every purchase. To learn how to maximize your accrued rewards, you’ll need to be strategic about the card you choose and how you use it. Always remember, all rewards cards come with fees and interest, so it’s important to keep your costs as low as possible while earning as much as you can. To do that, you need to start with the right card and then follow a few simple guidelines.
Find the right rewards credit card
Making the most of a rewards credit card starts with having the right card in the first place. But how do you find the right one for you? Here are some key factors you can use to narrow down your search.
Pick the right type
While some cards offer rewards on purchases in general, many offer higher tiers of rewards on certain categories like groceries, gas, travel or restaurants. Additionally, some card issuers offer you higher rewards in categories of your choice (usually selected on a quarterly basis) or in categories they choose. It’s important to review your purchases to figure out where you spend the most so you can pick a card that rewards you the most based on your spending.
Determine the overall value
In addition to the card you choose, it’s important to consider the following factors:
- Eligibility: Can you qualify for the card? Be sure to check the eligibility requirements and recommended credit score to ensure it’s a good fit for your rating and income reality. If the issuer offers prequalification, this is even better, since it won’t affect your credit score if you decide to apply.
- Fees: Fees can really cut into your earnings. Some rewards cards have an annual fee that can range anywhere from $25 all the way up to $550. There are also late fees, foreign transaction fees and more. Do the math and make sure that you’ll earn enough rewards each year to justify any extra charges.
- APR: Annual Percentage Rate (APR), is the interest rate you’ll pay on all purchases after the grace period ends. It’s a good idea to find a card with a competitive APR in case you ever need to carry a balance.
- Intro APR offers: APR promotional periods can help you save interest on purchases and balance transfers for a period of time after you sign up.
- Welcome bonuses: Most cards offer an enticing lump-sum reward that you get when you sign up and spend a certain amount within a specified time period, for example, the Bank of America Premium Rewards credit card offers 50,000 bonus points (amounting to a $500 value) when you spend at least $3,000 on the first 90 days after you sign up.
- Benefits and perks: Many cards offer perks like identity theft protection, rental car insurance, free credit scores and roadside assistance. Take a look at each card’s benefits and compare them to see which ones provide you with the most value.
- Rewards limits: Card issuers may limit the rewards you can earn at a specific rate, as is the case for the American Express EveryDay card which limits their bonus rewards yearly at $6,000.
- Redemption options: Check a card’s redemption options to find out how much your rewards will be worth upon redemption.
By looking at these key factors for each card you review, you will be able to figure out which one offers you the most value, all costs considered.
Maximize your credit card rewards
Once you have found the best rewards card for you, it’s time to get the most of it. Here are eight ways you can maximize your credit card rewards.
1. Read the fine print
Rewards programs can be complicated, so always read the fine print and fully understand it before you start spending. Keep in mind, there are cases of retailers who are not coded the way that you think. For example, a store like Target, isn’t classified as a grocery store even though it sells food. So if you’re trying to earn rewards on groceries, make sure the locale where you usually shop will count toward the right category.
2. Fully utilize top rewards categories
Next, be sure to pay with the rewards credit card that rewards you most handsomely for each purchase. For example, if you have two rewards credit cards and one pays you 6% on groceries (up to $1,500 per quarter, then 1%) while the other pays 3%, you’d want to use the one that pays 6% until you reach the quarterly cap. Then, you’d want to switch to the 3% card. It can help to keep a little list of the rewards rates and limits (or use a rewards management app) so you can ensure you’re getting the most out of each card.
3. Take advantage of intro APRs
Some rewards cards offer a 0% intro APR on purchases and balance transfers for several months after you open your account which can offer significant savings. For example, if you make a purchase or transfer high-interest debt and pay it off during the promotional period, you can avoid interest charges altogether. However, be aware that if you don’t pay your balance off before the promotion ends, the normal APR will apply — often retroactively.
4. Earn the sign-up bonus
Most cards offer a welcome bonus for signing up and spending a certain amount of money within the first few months. They are typically worth a few hundred dollars, so they can really boost your earnings. Be aware of the sign-up bonus requirements and ensure you meet them.
5. Redeem rewards wisely
Before you cash out your points, review the redemption options and figure out which ones offer the best value. You may be able to significantly increase your rewards with a simple choice. For example, if you have a Chase credit card, you can get 25% more value from your points by redeeming them for airfare or hotels through Chase Ultimate Rewards as opposed to redeeming them as cash back.
Another thing to keep in mind about your rewards is that they may expire. Make sure you check how long you have to redeem your points before they’re no longer valid.
6. Use your benefits
The ability to earn points, cash back or miles on purchases likely isn’t the only benefit that your rewards card offers. Most credit cards come with other valuable perks such as extended warranty protection, discounts on sports events tickets, access to airport lounges and more. If you don’t know what your card’s perks are, research them to learn more and plan ahead to fully utilize them.
7. Keep the costs down
Next, getting the most of your card means keeping costs down. The best way to do that is to pay off your full balance each month so you don’t get charged interest on carryover balances. Additionally, pay your bill on time each month to avoid late fees and minimize actions that may incur fees, like balance transfers, cash advances and foreign transactions.
8. Choose complimentary cards
Lastly, one of the best ways to maximize your earnings is to get multiple credit cards that reward you for different types of purchases. For example, if you travel frequently, you may want one that offers a high rewards rate for buying airline tickets like the Southwest Rapid Rewards Plus Credit Card, and another that rewards everyday spending like the Citi Double Cash Card.
The bottom line
To maximize your credit card rewards, you’ll need to find the right cards for you. A key part of that is choosing the products designed for people with your spending habits. Whether you are a frequent traveler or prefer to stay at home and spend on groceries and gas, there’s a card for you out there. But be sure to look at all the rates and terms carefully to ensure the benefits will outweigh the costs. Then, once you have the card, use it wisely to get as much out of it as you can.
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