How to maximize your credit card rewards

Credit card rewards programs can be a great asset for your finances. Here are tips and tricks to get the most out of everyday purchases.

Tags: Credit cards, Credit
Published: January 29, 2020

Whether you’re getting travel freebies, no-cost gift cards to your favorite retailers or tax-free cash in the bank, people love reaping the benefits of a rewards credit card.

When used wisely, rewards cards can be a strategic asset in your household budget. We’ll help break down rewards cards so you know how to make them work for you – and get the most out of those rewards.

 

How rewards credit cards work

The basic premise of a rewards card is simple. Use the card to make purchases, accumulate reward points and redeem those points for a reward you get to enjoy.

But the details of the rewards system can vary significantly from card to card. “Today, there’s a variety of rewards cards out on the market,” says Thomas Crowley, vice president of retail payment solutions at U.S. Bank. “The most popular is cash back.”

 

Cash back credit cards

With a cash back card, the purchases you make translate directly into a dollar value. Your card may convert that reward into a credit on your next card statement or even direct deposit the cash you’ve earned into your checking account.

Crowley points out that the way you earn cash back usually fits into one of two systems:

  • With a flat-rate rewards card, you earn cash back at a constant rate – maybe 1.5 percent of the value of every purchase you make.
  • With a tiered rewards card, you earn cash back at a constant rate for most purchases but receive higher rates for specific retailers or specific spending categories.

 

Travel rewards credit cards

In addition to cash back cards, travel rewards are extremely popular. You earn points or miles for your purchases and redeem those points for travel-related freebies, such as hotel stays or airfare. Similar to cash back cards, travel rewards cards may let you earn points on a flat-rate basis or using a tiered system.

“If you’re an avid traveler, travel benefits are typically attached to these cards, so you might get benefits like no foreign exchange fees, TSA pre-check reimbursement or annual travel credits,” Crowley says.

 

Other types of perks

Many cards give you even more options for cashing in rewards – magazine and newspaper subscriptions, gift cards, electronics, small appliances and even tickets to events. Some retailer-specific cards let you earn money-saving coupons, free shipping or early access to store deals. The possibilities are nearly endless.

 

How to take advantage of credit card rewards

You’ll always want to use a credit card responsibly. But the right rewards card can help you build your credit and earn extra perks with every use. Keep these tips in mind for choosing the best cards and supersizing your rewards:

  • Choose a rewards card that fits your lifestyle. For instance, if you frequently charge your groceries and gas, look for a rewards card that gives you extra points in these categories. If you’re a regular traveler, consider the benefits of a travel rewards card instead.
  • Minimize the cost of your rewards card. Make sure your card comes with no annual fee or a fee that’s 100 percent worth it for the rewards you’ll get. And seek out a low-interest card if you think you may carry a balance.
  • Understand the way your rewards system works. What’s the value exchange for your points? Do you need to spend a minimum amount before earning the best rewards? Are there limits to the points you can earn? Be sure to read the fine print before signing on with a card.
  • Watch out for expiration dates on points. Some cards, says Crowley, have a five-year expiration on points, while points on other cards never expire. Others take back points earned if you stop using your card for a period of time. If you plan to earn and redeem rewards frequently though, you may not need to worry about losing points at all.
  • Plan to do the extra work that rewards cards require. At a minimum, you’ll likely need to log into your cardholder’s site to redeem rewards on a regular basis. But your rewards system may require additional steps – such as signing up each quarter for rotating tiered rewards, if your card offers that.
  • Get strategic about which rewards card you use when. It’s important to know your cards inside-out if you plan to keep multiple rewards cards in your wallet. Crowley notes that two or more cards can earn you higher rewards than just one, but you’ll also have to juggle the complexity of multiple cards, their billing due dates and rewards systems.

 

When a rewards credit card might not make sense

The benefits of a rewards card are clear, but when should you think twice before applying for one?

First and foremost, you want a rewards card to be an asset to your finances – not a liability. So skip the card if you worry you’ll overspend simply to earn rewards. “No matter what rewards you get back, they’re never going to outrun the amount of money you owe to the credit card for the purchases you’ve made,” Crowley says.

Second, watch out for higher-than-average interest rates. Most rewards cards come with higher rates than their non-rewards counterparts, shares Crowley. So, if you’re planning to transfer a balance or carry one from month to month, he recommends exploring non-rewards cards with low introductory or long-term interest rates as a better option.

Third, find out if your desired rewards card comes with an annual fee. Crowley points out, however, that a card with that fee might still be a good fit for your wallet. “Customers just want to make sure that they’re getting the right value exchange in return for the amount of annual fee they’re going to pay,” he says.

Finally, Crowley says, be aware of hurdles to redeeming your points. Some cards let you cash in any number of points, while others will require you to redeem rewards only in increments of $25. Know which system your card uses and whether its rules will work with your spending habits.

 

Looking to boost your rewards? Try our credit card comparison tool to find the best U.S. Bank option for your lifestyle.