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How to get the most from your rewards credit cards

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Americans love a bargain. But when it comes to credit card rewards, consumers don't always get the most for their money. The average household active in a rewards program doesn't redeem a third of the rewards they earn each year, according to a study from Colloquy and Swift Exchange. Here’s how to get the most from your rewards card.

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The average household active in a rewards program doesn't redeem a third of the rewards they earn each year, according to a study from Colloquy and Swift Exchange. That includes credit card rewards.

"There are probably a slew of people out there who have cards with points on all of them," says John Ulzheimer, a nationally recognized expert on credit reporting, credit scoring and identity theft. "And they don't even realize it."

Of course, the point of getting a rewards credit card is to treat yourself to the perks of the rewards program. The best way to make sure you get the most out of your rewards credit card is to pick the right one and make sure you pay it off each month. Then use it to your greatest advantage and avoid possible pitfalls such as leaving points on the table.

Pick the right rewards credit card

The first hurdle is to make sure the credit card and rewards program you choose fits your financial lifestyle. If you travel a lot in your free time, maybe a hotel or airline card is a good fit for you. A gas rewards credit card might be best for a road warrior.

And those who like instant gratification and an uncomplicated rewards system may prefer cash-back credit cards, says Amy Lenander, chief marketing officer for Capital One UK. 

"Cash rewards are as easy and straightforward as rewards can get," she says. "The customers who like miles and points tend to save up for a big reward and dream up the possibility, whereas the cash-back customer tends to be more practical."

Additionally, many cash-back cards come with numerous ways to redeem your rewards such as checks, statement credits, gift cards or charity donations. Others will automatically deposit your rewards directly into your bank account.

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Not all cards are created equal, though, even if they offer a similar type of rewards program. That's why it's important to read the fine print.

Know the rules

Rewards credit cards come in many flavors. Some require meeting a spending threshold before you can earn rewards. Others cap the amount of rewards you can earn. You also may find blackout dates for redeeming travel rewards or expiration dates on points.

"These rewards programs also are subject to change at any time," says Linda Sherry, director of national priorities at watchdog group Consumer Action.

Cash-back cards can also involve a little advanced planning. While most cards offer 1%  to 2% cash back, there can be restrictions or requirements, such as caps on spending in different categories or more rewards for purchases on dining, gas or groceries.

Some cash-back rewards programs are even more complex, with rotating categories requiring quarterly registration. In some instances, consumers pick the spending category receiving the rewards or the rewards are given to the highest spending category, says Bill McCracken, CEO of Synergistics Research in Atlanta. This means more monitoring by the consumer to fully take advantage of their credit card.

Look for bonus opportunities

Keep an eye out for opportunities to double or even triple your rewards earnings power. Many issuers offer an increased cash-back return rate every quarter in certain categories, typically ones that go with the season, says Lisa Hronek, sales operation specialist at Mintel.

For example, issuers will bump up the rate to 5% on summer gas purchases because it's peak driving season. Other issuers will reward travel purchases more during the winter holidays.

Sometimes you will need to enroll in these quarterly cash-back specials, so be on the lookout for special mailings or online alerts to register, Hronek says.

Another easy way to earn more rewards is to shop through the issuers' online shopping portals, says Dana Traci, a vice president at Discover Financial Services. For example, Discover cardholders who shop through the Discover Deals portal, which features such retailers as Macy's, Target and the Apple Store, can earn up to 5% in cash back on their purchases, up to a quarterly maximum on categories that change throughout the year, such as gas, restaurants and more. Other issuers offer similar bonuses.

"Online shopping portals give customers a clear way to maximize their rewards," Traci says.

Use your rewards card wisely

Even with the bells and whistles, keep in mind that a rewards credit card is still a credit card. That means sticking to the tried-and-true rule of paying off your entire balance every month.

People who keep revolving balances aren't getting the most out of their rewards and are usually paying a higher interest rate. Most issuers fund credit card rewards programs by charging higher interest rates on rewards cards, says Ulzheimer.

"If you keep a balance, you're really funding your own rewards program," he says. "Whatever you're earning in points, miles or cash back, you're likely giving it right back to the issuer in interest."

Another no-no is missing a payment, says Sherry. If you miss a payment, often you forfeit the rewards you have earned, she says. The same thing goes for long periods of inactivity on your card; you may lose the rewards or cash back you've earned.

Ulzheimer recommends cashing in (or redeeming) your rewards periodically instead of hoarding them. That way, you'll get the full value without the risk of losing them.

If you want to find out how much bang you're getting for your rewards, check out your year-end summary that issuers provide, says Pam Girardo, head of consumer and digital affairs at Capital One.

"Simply divide the rewards you earned by how much you spent, and see what you come out with," she says. "That's one way for folks to see if they came out ahead."

If you don't like what you see, maybe it's time for a switch.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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