Growing up, credit cards were seen as a boogeyman that would cause you to get into anxiety-inducing debt that made you feel like you just couldn’t escape. But how true is that? Well, it’s true, but if you use credit cards wisely, they don’t need to be a bad thing at all. Actually, credit cards are not just for convenience; they can be fantastic when it comes to earning rewards, cashback, and even travel points.
However, to truly maximize your credit card rewards, you need to be strategic about how you use them. This guide will walk you through everything you need to know to get the most out of your credit cards.
Understand Your Credit Card Types
So, it’s best to understand that different credit cards offer different kinds of rewards. So, just knowing what type of card you have or want will be the first step to maximizing your benefits.
Cashback Cards
Cashback cards reward you with a percentage of your purchases back in cash. These cards are great for everyday expenses and often have categories like groceries, gas, and dining where you can earn higher percentages.
Travel Rewards Cards
Travel rewards cards accumulate points, sometimes called “miles,” which can be redeemed for flights, hotels, and other travel-related expenses. These cards often come with perks like free checked bags, priority boarding, and access to airport lounges. You’ll usually find that airlines like Delta will partner up with companies and offer these.
Store-Specific Cards
Store-specific cards offer rewards for purchases made at a particular retailer. These can be beneficial if you frequently shop at that store, but they often have higher interest rates and fewer rewards on purchases made outside the store. But if you’re someone who is trying to build credit, then this can be a great idea.
General Rewards Cards
These are usually nothing more than simple points that you can then redeem for a variety of things, such as gift cards or even merchandise, sometimes even discounts on hotels. There’s some flexibility to these, granted they don’t have the highest reward rates.
Know Your Spending Habits
So, something else you’re really going to have to think about too would be the spending habits themselves. It’s best to have an idea of this and choose the right credit card so you can truly maximize your rewards.
Track Your Expenses
Keep track of where and how you spend your money. This can be done through budgeting apps, spreadsheets, or simply reviewing your credit card statements. Identifying your main spending categories will help you select a card that offers the most rewards for your purchases.
Match Cards to Categories
Once you know where you spend the most, match your spending categories with a credit card that offers the highest rewards in those areas. For example, if you spend a lot on dining and entertainment, find a card that offers extra points or cashback for those purchases.
Optimize Your Rewards
Having the right cards and understanding your spending habits are truly just the beginning. Next, you need to figure out the best way to maximize your rewards.
Utilize Sign-Up Bonuses
For the most part, you can expect a lot of credit cards to offer sign-up bonuses if you spend a certain amount within the first few months. These bonuses can be a substantial boost to your rewards. Plan your larger purchases around these sign-up periods to maximize your bonus. But you need to read the fine print of these because it’s not always as easy as you might think.
Take Advantage of Rotating Categories
Some credit cards offer rotating categories that change every quarter. These categories often offer higher cashback percentages or bonus points. So, you’re going to want to mark your calendar and adjust your spending to take advantage of these categories.
Combine Rewards Programs
So, this was already mentioned somewhat earlier because general points are used to explain this. However, some reward programs allow you to transfer points between them. For example, certain travel cards let you transfer points to airline or hotel loyalty programs. This can be a great way to consolidate your points and maximize their value.
Pay Your Balance in Full
This is the thing about credit cards: if you only spend what you can afford and immediately pay back everything ASAP, then you can get plenty of rewards. Credit cards don’t have to be bad; they only get bad if you rack up debt, especially with those interest charges- that alone outweighs the value of any rewards you earn. Paying your balance in full each month ensures that you’re gaining the full benefit of your rewards without incurring additional costs.
Redeem Rewards Wisely
How you redeem your rewards is where you can significantly impact the value, so where do you even begin?
Look for High-Value Redemptions
Not all redemptions are created equal. For example, using points for travel often provides more value than redeeming them for gift cards or merchandise. So, it’s just best to do some research to find out the best redemption options for your rewards.
Avoid Impulse Redemptions
It can be tempting to use your points for quick, easy rewards, but impulse redemptions usually don’t offer the best value. So, it’s going to be best to just plan your redemptions to align with your financial goals, whether it’s saving on a big trip or getting the most cashback for your spending.
Monitor for Expiration Dates
Did you know that rewards expire? That’s right; some rewards and points expire if they are not used within a certain timeframe. So, you need to try to keep track of expiration dates to ensure you don’t lose your hard-earned rewards. You’ll need to set reminders or check your account regularly to stay on top of all of this.
Leverage Additional Benefits
You read that right; there are other benefits, too! It all depends on the card itself; sometimes, there’s access to special events or even presale tickets. You could even look into purchasing protection, and travel insurance is an option for some, too.
Now Start Maximizing!
Overall, maximizing your credit card rewards involves more than just swiping your card for every purchase. So, just by understanding the different types of credit cards out there, you’ll be able to better align your spending habits and optimize what you earn so you can redeem those rewards! It’s all about strategic planning, but it’s definitely worth it!
