10/4/2013 5:30 AM ET|
Dos and don'ts for maximizing credit rewards
Discipline and a careful strategy will allow you to reap all kinds of freebies, but make sure you follow the Golden Rule: Don't carry a balance.
Free trips, free stuff and cheap gas. You know you can get it, and you want it. That's perfectly understandable, and it may be why you signed up for a particular credit card in the first place.
But as many long-time credit card holders know, just because you have a credit card that offers rewards, it doesn't mean you're going to get them. There are right ways and wrong ways to making sure you receive the rewards that come with using your credit card. So if you're wondering how to get the most out of your piece of the plastic pie, pay attention to these tips.
Carry a balance. Sure, you'll need to use your card in order to get points toward your rewards, but the way you get value out of your credit card is to pay everything off every month then receive these goodies. If you carry a balance, what you're paying in interest could arguably pay for whatever you're receiving in rewards, and the credit cards with rewards usually have higher interest rates.
Miss payments. It's a good way to lose your rewards you've been collecting, and, of course, not a good idea for your credit score.
Spend just to get rewards. Yeah, it's fun to get rewards, but considering that a point is generally worth a penny, you're really not doing yourself any favors if you go that route. The rewards are an economic boon if you're leveraging them whenever you're buying things you're going to buy anyway, but the moment you spend just to get the rewards, you've gone off the rails. Really.
Spread yourself with too many credit cards. If you have a slew of credit cards, you're probably going to find that you're spending a little on a lot of credit cards, which means your reward points are going to be spread around, and you're going to dilute your rewards. Unless, of course, you're someone like Bill Gates, in which case you can ignore this advice, and, hey, great to meet you, and thanks for reading this.
Read the fine print. Many credit cards offer their cardholders an array of rewards, some of them pretty amazing (you can get ninja lessons with Chase Ultimate Rewards, for instance) and some of them pretty basic (discounted gas, which is great, but it's no ninja lessons), but landing these rewards is more than just spending a bunch of money and collecting points.
Some credit cards have a limit on the amount of rewards you're able to earn in a certain time period. Others have expiration dates on points, so that if you don't use them by a certain time, they're gone. Some cards that offer airline trips have blackout dates. So read the fine print, and if you really want the rewards you're after, make sure you're marking up your calendar for important dates, so you know when it really pays to use your card, what the spending requirements are for bonuses, and when certain redemptions expire.
Look for ways to get more mileage out of your rewards. Sometimes credit cards will offer chances to double or triple your rewards points, like if you stay at a hotel during the off travel season, or you may find you can get a cash-back return rate every quarter if you spend money on certain categories. For instance, you might get more money back when you buy gas during the certain period of the year.
Use your credit cards' online shopping portal. If you're going to be buying certain things, in most cases, it makes economic sense to play by the credit card's rules. For instance, if you go to Citi's Citi Bonus Cash Center and shop with their 400 online retailers, you can earn an average of 5 percent cash back. Discover has ShopDiscover, with over 200 retailers, where you can earn up to 20 percent in cash back.
But don't just assume that you're getting the best deal at these online portals. You may be, but if you have a coupon code for an item, you may not be able to use it in the credit card's online shopping mall. You may have to shop and look around a bit to make sure you're getting the absolute best rate.
Sign up your card on the issuer's web site. Yes, your emailbox is full enough, but you'll get email alerts about special offers. If you really want to maximize your rewards, those special offers are pretty important.
Get a credit card with reward points that you're actually interested in earning. Sure, that sounds like obvious advice, but you know, it's really easy to read an article like this and get caught up in the excitement of wanting to get discounts on gas and earn those incredible experiences, like VIP access to concerts or going to a wine tasting. But not all rewards programs are the same. Not everyone likes wine or bungee jumping, or you may find that a rewards program is better for an experienced world traveler when all you want is a break on your groceries and gas. Reward yourself, not the credit card companies.
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To avoid overspending, I keep track of my credit card balance at least twice a week. Otherwise, you can forget how much you spent because you don't see the cash leaving your wallet.
I have the best cash-back cards I could get because I can used it on Amazon.com and other purchases. I bought Linda Ronstadt's "Simple Dreams" memoir last month (worth a read for Baby Boomers and interested others) for $0.09 because of the cash-back I had built up.
I was in Greece buying the last available tickets to a tour's side trip with a long line behind me when I found they would NOT take my only credit card, a Mastercard: only Visa. I remembered the Visa logo on my bank ATM card and that saved the day. So I have one Visa, one Mastercard, and one Discovercard because some places only take one. And I have it set up to automatically pay off each statement balance completely each month to avoid paying interest.
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