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Credit card rewards programs can be great if you actually use them. They can save you money, offer you discounts and free travel, and even give you a way to give a gift for free by redeeming your points for gift cards. Some cards only offer certain types of rewards and only for certain categories. Other cards have quarterly rewards limits. The key is to know how to use them so you can maximize the benefits they offer and get the most bang for your buck.
When I retired from the cleaning business last year I decided I needed to take a much-needed vacation. It had been over six years since I went anywhere just for fun and I knew I was long overdue.
I planned a trip that took me up and down the east coast over two weeks and visited many of my friends along the way. I mapped out everywhere I wanted to go and off I went.
I stayed at some of the nicest hotels out there- the Westin, the Hilton, the Sheraton, the Marriott, the DoubleTree. No roughing it for me. I wanted to feel pampered and boy I was. These hotels did not disappoint.
So how did I afford it all?
I used reward points and got more than $2,000 in hotel stays completely FREE.
We’ve all been lured by the offers to earn large bonuses from credit card rewards programs. Whether it be 35,000 points for an air lines reward, cash back on everyday purchases or Disney buck, or something free for making a purchase, the enticements are everywhere.
But what usually ends up happening is we forget all about the rewards program, goes on life as usual and we end up paying big annual fees and interest rates.
What you have to realize is that credit card rewards programs are not there to help you. They are created to entice you and get you to spend more money and put it on their credit card, not pay the balance in full each month and pay interest rate charges. They are in it to make money, not give you some free perk.
But there is a big downside to credit cards! It is easy to overspend and to get yourself in trouble, so if money and spending is a struggle for you, don’t risk it. That said, if your finances are organized, you have savings, you’re good at budgeting and have demonstrated good self control with credit cards, and you are in a good financial place, then there are some great opportunities you can take advantage of to earn rewards.
MAXIMIZING YOUR CREDIT CARD REWARDS PROGRAM
Depending on the card you use, you can earn points for everything from gas and grocery shopping to eating out to buying a new TV. But understanding how your credit card company calculates their rewards will help you know which card to use and for which purchases.
Here are some great ways to make the most of your rewards programs.
CHOOSE THE RIGHT CARD
To get the most benefits from your card, make sure you choose the right one. If you travel frequently, choose a card that offers mileage points and hotel points. For everyday shopping like groceries and trips to Target, choose a card that offers cash back. 1% cash back is the industry standard, but many cards like Discover, Capital One, and Citi Double Cash offer higher rewards.
If you don’t drive a lot, a card that offers gas rewards is probably not your best option. While they usually offer 2-3% back at gas stations, if you only use your car to drive less than 1,000 a month and you get 25-30 miles per gallon, the cash back you receive will not be as beneficial as an option that offers cash back for all purchases.
If you eat out often, you’ll want a card that offers cash back for restaurants as well as groceries and other shopping. For instance, American Express Blue Card offers 6% cash back on up to $6,000 of groceries annually and American Express Premier Rewards Gold offers twice the point for restaurants and grocery shopping.
Think about how you use your card then pick one that offers the best rewards for you.
PAY YOUR BILLS
Once you have the best card for your spending habits, set up automatic bill pay for your utility bills using this card. The more you spend, the more points you receive. Pay your cell phone, utilities, subscription services, internet, and even car payment. Instead of paying these out of your checking account, pay them with your card then pay your card off every month using your checking account to avoid interest fees, and of course, getting in to debt.
LIMIT YOUR STORE CARDS
If you’re going to get a card for a specific store, make sure it’s somewhere you shop frequently and the card offers good rewards. For instance, Target RedCard offers 5% rewards. If you shop at Target often, especially during the holiday season, this is a great way to earn some rewards.
PAY FOR LARGE PURCHASES
If you’re planning a large purchase like new furniture or your child’s tuition, and you have the credit limit available, use your rewards card. For large purchases, many businesses offer a discount for paying upfront instead of over time plus you’ll earn a significant amount of points at one time.
BE AWARE OF BONUSES
Many cards offer a signup bonus of rewards points. Chase Sapphire Reserve offers 50,000 bonus points when you sign up. American Express offers bonus points throughout the year for special promotions. For instance, they offer double the points for Small Business Saturday when you shop at a small business. Some companies even offer referral bonuses for referring a new cardholder. Be sure to read your mailings and emails that come from your credit card company or call and ask about bonus points.
BE AWARE OF LIMITS
Many companies offer cash back bonuses to a certain limit so make sure you understand what those limits are with your card. Chase Freedom and Discover both offer 5% cash back, which is great, but only up to $1,500 per quarter. Once you reach your rewards limit, you won’t earn any more rewards until the time period renews. This is why it’s helpful to have more than one card that offers large bonuses. Once you reach your rewards limit on one card, you can start using the other.
It can become confusing and overwhelming to try and keep track of all of your cards and their rewards limits in your head. Instead, create a spreadsheet or Word document where you can list all of your cards, the rewards percentages they offer, the categories that receive the highest rewards, and if there is a quarterly limit.
For on-the-go tracking, tape a piece of masking tape to the front of each card and label them with the categories each card offers bonuses for. That way, when you’re out shopping, you don’t have to remember which card to use. You can simply look at the labels on your cards to decide how to pay.
In addition to cash back and travel points, many companies offer rewards that you can redeem for gift cards. This is perfect for gift giving and even your own shopping needs. Redeem points for gift cards to Amazon, Target, Starbucks, and more. These gift cards will eliminate the need to purchase a gift for birthdays and holidays.
If you don’t want to carry more than one card, be sure it’s one that offers at least 1.5-2% cash back as well as bonuses on all types of purchases so that you can use it for everything. But carrying at least two cards can significantly boost your reward earning potential, especially if your cards have reward limits.
The most important thing you can do to maximize your credit card rewards program is to understand how the program works for each card you have. If the cards you currently have aren’t helping you reach your best rewards potential, it may be time to research other cards and transfer your balances, which also earns points.