How to Get the Most of Your Rewards Credit Cards

FT Contributor  | 

A personal budget is a great way to keep your finances in order. If you are looking for a way to update your financial strategy and get more for the purchases you make, a rewards credit card can be an excellent addition to your financial arsenal. Having a rewards card presents you with the opportunity to gain perks and benefits for purchases you were going to make anyway, like gas and groceries.

If you’re interested in adding a rewards card to your financial strategy, this guide will explain the best way to get the most out of the card that you choose. While you can negotiate for better rewards in some cases, you should opt for the card that is going to benefit you the most right out of the gate.

Whether you already have a rewards card and you’re looking to use it optimally or you’re considering signing up for one and don’t know where to start, make the following considerations when selecting the rewards credit card that’s right for you.

Select the Right Card

No two spending habits are the same. Everyone has their own unique approach to their financial strategy, so it’s important to take the time to analyze the rewards a credit card company is offering in order to choose the one that’s going to be best for you. Consider the following specifics when signing up for a rewards credit card.

Spending Habits

If you are single, your spending habits will vary greatly from someone who is married and has children. The costs of basic expenses like gas and groceries will vary depending on how many mouths you have to feed. You should choose a rewards card that is going to benefit you most based on your spending habits.

For instance, someone with a significant grocery bill might want a store credit card that offers a percentage back on purchases made at specific grocers, while someone who has a significant commute might benefit more from a gas credit card.

Personal Preferences

You should also consider your personal preferences when choosing a rewards credit card. Do you prefer rewards that will allow you to travel or cashback credit card rewards instead? Do you want flat-rate rewards or the opportunity to earn an unlimited amount of rewards? There are a variety of rewards credit cards available, so it’s important to consider the rewards you will reap the most benefit from.

Credit Score and Financial History

With any credit card, you’ll get the most out of it if you have a good credit score. If your credit score is decent, you can open accounts with multiple rewards credit cards, allowing you to earn different rewards based on your individual spending habits. This way, you could have a rewards card for travel, one for groceries, one for gas, and one for everything else, allowing you to get the most rewards for the money you would be spending regardless.

Be sure not to incur too many hard credit checks from credit card companies — they’ll hurt your credit score. If you’re going to apply for multiple rewards cards, do so within a short period of time, such as one month. It will only count as one credit check.

Use Your Card Wisely

To get the most out of your rewards credit card, it’s important to use it wisely. Use your rewards card for all of the purchases you already make so that you can accumulate points swiftly.

Note that a rewards credit card is not an invitation to spend money on things you don’t need. You should still stick to your personal budget and only spend money that you have available. Missing payments on your credit card could cause your rewards to be taken away.  

Also, familiarize yourself with the specific things that will generate rewards and the purchases that won’t. Similarly, you should get familiar with the credit card company’s policies. There may be service fees for using a credit card, such as an annual charge. If the service fee amounts to more than the reward, that card may not be the best option for you.

Finally, it’s important to redeem your rewards the right way. You may be eligible for cashback, but a greater reward could be available, such as discounts on specific purchases, or gift cards. Understanding all of the rewards that are available to you can help you redeem your rewards optimally.

Pay Balances Off in Full and on Time

Credit cards allow you to carry a balance, but with interest tacked on to your total. You can choose to only pay interest when a bill is due, but paying interest on a rewards card defeats the purpose of the rewards program from the beginning. In fact, only paying interest can reduce the overall value of having a credit card altogether. It’s best practice to pay off balances in full and on time to avoid damaging your credit score or losing out on your accumulated rewards.

To help prevent carrying a balance on your rewards credit card, use a budget to maintain your spending. Only buy what you can afford to pay off, and keep emergency funds in savings for when unexpected expenses come up.

Redeem Your Rewards the Right Way

Like selecting the right card, it’s important to redeem your rewards in a way that’s beneficial to your life. For example, if you have a travel credit card, it is smart to book flights with miles that you’ve earned or at a time of the year where your miles are worth the most. Also, you should redeem your rewards before you lose them, as some companies will take rewards away after a certain period of time.

Note that credit card rewards aren’t typically taxed, so you shouldn’t have to claim them when it comes time to file your taxes. By selecting a large and applicable purchase you can afford, you’ll be able to reap significant benefits.

Credit cards that offer rewards could be right for you if you play to your strengths. Consider your spending habits and the types of rewards that will benefit you most before you sign up for a rewards credit card.


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This post was updated January 15, 2020. It was originally published January 15, 2020.