Financial Tips: How to Get the Most from Rewards Credit Cards

The credit card marketplace is a confusing one. It can be difficult to figure out exactly how to smartly use your rewards cards and get the most out of them. Check out this article for a few financial tips that will help.

Nowadays, virtually all credit card issuers are offering clients some sort of rewards. Making the most of these perks, however, is up to the consumers. Whether you opt for a card featuring cash back, points, or other types of incentives, you need to be sure that the choice you make aligns with your interests and goals. Moreover, you must consider other factors as well – like fees and interest rates. Misusing the card or failing to understand its terms can wipe out your winnings, so it’s important to do some research in order to make an informed decision.

First off, keep in mind that credit card rewards aren’t for everyone. If you carry a balance, using a reward card isn’t advisable. When you pursue rewards, you lose the opportunity to receive the lower interest rates usually offered for non-reward cards; and having a lower interest rate is far more advantageous than any other perks you might get. Moreover, people struggling with credit card debt should also stay away from rewards cards. After all, the last thing you need is to spend more in order to qualify for those tempting prizes.

If that’s not the case, playing for rewards can be fun and profitable, as long as you’re familiar with the rules of the game. Here are a few financial tips that will help.

Compare and Contrast

Don’t choose the first card that comes your way. Take the time to thoroughly research the market, so you get the best deal available. The biggest mistake you can make is to add a credit card to your wallet on impulse, without assessing if you truly need it or not. After graduating from Harvard, I applied for Harvard Card, because of the exceptional travel rewards it offers. Luckily, I never regretted my decision, but I still beat myself up for not properly doing my homework before starting the application process.

Assess rewards and compare interest rates and annual fees - although these will vary depending on your individual credit score and credit history. Never go for a card with a high annual feel, since the fee may wipe out any advantage you gain through rewards. Google has a great tool that allows you to compare credit cards.

Avoid Unnecessary Fees

Credit card companies are sneaky. They not only charge late payment or over-the-limit-fees, but can also charge consumers for transferring balances, cash advances, or other similar services. Your rewards credit card likely came with high interest rates and fees, so always read the credit card agreement to learn more about what the company charges. This allows you to avoid unpleasant surprises later on.

Align Rewards With Your Interests

When I applied for my rewards credit card, I was looking for travel points. You might have other priorities in mind. These cards come in many shapes and sized. You could accumulate points toward gift cards, merchandise, cash back, or airline miles. It makes sense to decide which of these perks is more important to you and act accordingly.

If you travel a lot, a card with travel rewards is a good choice. However, if you want to save money and manage your income better, a card with cash back or points will be the better choice. Just make sure that you don’t pick rewards you’re unlikely to ever use.

Know When Your Rewards Expire

Billions of rewards points go unclaimed every year. Check the fine print in your credit card agreement or on the card issuer’s website to figure out when you rewards points expire. Be sure to claim them before that date. You might get a notice from the credit card company before they expire, but it’s better to be safe than sorry.

Track Changes in Terms

Credit card issuers are always tweaking their terms; and when they do so, they usually notify consumers via snail mail, in the fine print. Always read whatever notification the credit card company sends over carefully – you want to know when there’s a change in rewards terms that can cause you to get fewer points or a lower percentage of cash back.

Stay on Top of Your Spending

Rewards cards can easily spur you to spend more. Accumulating points can be addictive, and you might feel tempted to justify some of your spending with the fact that you’re getting something in return.

However, don’t forget that you’re still spending a truckload of money to collect those rewards points. For instance, if you have 1,000 points and they equal $10, you probably spent $1000 to earn them. If those purchases aren’t justified, you just wasted a crazy amount of cash in order to afford a cocktail. Never lose your perspective when it comes to collecting credit card rewards.

In addition to the above tips, keep your credit score in good shape. This makes you a desirable client in the eyes of credit card companies. When it’s time to switch your rewards cards and look for better deals, you’ll have plenty of options to choose from.