Key learning points
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Rewards credit cards come in many forms, from the types of rewards they offer (such as points, miles, or cash back) to the way those rewards are structured.
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To get the most out of your rewards cards, familiarize yourself with the structure of each card, learn about the welcome bonus for new cardholders, and investigate the value of each card’s redemption options and benefits.
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Read the fine print for each card to understand the spending limits by category and the rewards balances required for certain redemptions. There are also other details that may limit your redemption potential.
When used wisely, credit cards are a solid way to get the most out of your everyday spending. Rewards credit cards in particular allow you to earn points, miles, or cash back when you use your card to make purchases. These rewards can add up to serious savings on your regular spending over time.
Rewards credit cards allow you to earn rewards on purchases you would make anyway. The best credit cards offer rewards with high earning potential, competitive rates, and minimal card fees.
Get the most out of your credit card rewards by knowing the ins and outs of your credit card rewards and implementing these seven strategies.
1. Choose reward structures that fit your spending patterns
Before you can start maximizing your credit card rewards, you need to make sure you get the right cards in the first place. The best rewards credit cards should help you get the most out of your spending habits and lifestyle. Since individual cards offer different types of rewards on your spending, start by clearly identifying the types of things you spend the most on to maximize your earnings.
For example, if you travel frequently, you might want to compare credit cards that reward cardholders with boosted points, miles, or cash back on travel spending. If you spend a lot on groceries and gas, look for at least one card with higher earning potential in those categories. If your spending habits are generally mixed and you don’t tend to spend a lot in any one category, a flat-rate cash back credit card might be an ideal card to add to your wallet.
2. Use the best card for each rewards category
Once you’re sure you have the right rewards credit cards for your needs, it’s time to optimize your spending on them. Check your wallet for the cards that offer the best rewards for what you’re spending on.
Let’s say you just opened the Blue Cash Preferred® Card from American Express. It gives you 6 percent cash back on the first $6,000 you spend at U.S. grocery stores in a calendar year, and 1 percent after that.
If you’ve been paying for groceries with a flat-rate card like the Wells Fargo Active Cash® Card, which offers unlimited 2 percent cash rewards on purchases, you’ll want to use the Blue Cash Preferred instead to earn an additional 4 percent cash rewards (up to the annual limit). Once you hit your grocery spending limit, it makes sense to switch back to the Active Cash Card to earn an additional 1 percent on your purchases.
Additionally, issuers like Chase and Discover offer 5 percent rotating bonus category cards that feature new cash back rewards categories every calendar quarter, up to a spending limit and with required activation. If your new card has rotating bonus categories, be sure to activate those categories as soon as possible and keep an eye on the rewards calendar so you can plan ahead.
3. Earn your sign up bonus
Many credit cards offer lucrative sign-up bonuses, also known as welcome bonuses, that can earn cardholders hundreds of dollars in rewards if they meet certain requirements after opening an account. In most cases, credit card issuers require cardholders to spend a certain amount of money during the first few months after opening a card in order to qualify for the sign-up bonus.
To ensure you qualify after getting a new card, read the terms of the bonus offer carefully and structure your spending accordingly. While you should always borrow responsibly and not spend more than you can afford, the qualifying period for a welcome bonus is a good time to make a large purchase that you have been planning to make.
4. Explore redemption options
Visit the rewards portal for each of your card’s rewards programs to learn about redemption options. If your card offers cash back rewards, you may be able to choose from a statement credit, direct deposit or a check. If you earn miles, the portal will tell you how to redeem those miles for airfare, hotel stays and other benefits. And if you earn points, you may be able to choose from redemptions for travel, gift cards, merchandise, charitable donations and more.
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Keep in mind: The value you receive for your points, miles, or cash back is not always the same for all available redemption options. For example, redeeming for travel purchases may earn you 1 cent per mile, while merchandise may only earn you 0.8 cents in value. There may also be a rewards balance requirement to make redemptions, such as a minimum of $25 in cash back earnings to redeem for a gift card.
When it comes to travel, points and miles can be worth more when transferred to airline and hotel partners, depending on the partner and rewards currency. Some cards also offer increased rewards on travel booked through the issuer portal, such as the Chase Sapphire Preferred® Card and its 25 percent point increase on travel booked through Chase Ultimate Rewards.
Check out Bankrate’s Travel Toolkit for more information on using points and miles strategically, as well as general advice on saving money with travel credit cards.
5. Take advantage of all the benefits of your card
While many cardholders are understandably focused on the earning potential of rewards credit cards, it’s worth considering other related benefits and perks when choosing a card. These perks can often save you money on things you’d buy anyway.
In addition to earning rewards like points, miles or cashback, most rewards credit cards sweeten the deal with additional perks. Benefits of the best travel credit cards can include:
Many rewards cards also have shopping and entertainment-related benefits, such as extended warranties on items purchased with your card and discounts and special offers for shopping at certain retailers. Cards may also have features such as fraud and purchase protection.
The higher the annual fee, the more valuable your card’s benefits typically are. Elite or premium rewards cards — cards with fees in the $500 range — come with statement credits on eligible travel or retail purchases each year, but you’ll want to read the terms carefully to make sure you’re getting the full value out of these offers. If you’re able to get the most out of your rewards credit card, chances are you’ll be able to spend enough to offset the annual fee.
6. Pay your bills in full every month
Putting all of your purchases on a credit card can help you maximize your rewards. However, the earning potential of a rewards credit card is typically negated if you carry a revolving balance from month to month. This is because revolving balance cards accrue interest, which you must pay in addition to paying off your existing purchases.
Over time, using a credit card to spend beyond your means can result in a mountain of debt that can be difficult to get out of. While many people understandably turn to credit cards when times are tough, we recommend paying off your entire balance each month whenever possible. If you don’t carry a revolving balance, you can take advantage of credit card rewards and perks without paying unnecessary credit card interest.
That said, to earn the most rewards, you should use your credit cards for every purchase — provided you can pay your bills in full at the end of the month. To hold yourself accountable, create a budget and track your transaction history to make sure you’re on track.
7. Read the fine print
Some issuers have specific rules about whether a particular retailer fits into a bonus spending category. For example, while you can shop for groceries at some Walmart and Target locations, many credit cards don’t consider them “grocery stores” and won’t give you bonus points on purchases you make there.
On the other hand, some issuers add extra value to your rewards points when you redeem them in a certain way (for example, Chase offers a 25 percent bonus on Sapphire Preferred points redeemed through its Ultimate Rewards travel portal).
Finally, some cards have complicated rewards redemption processes or even limits on how much cash back or points you can collect at once. You should also pay attention to which types of redemptions offer the most value. Cash back, statement credits, gift cards, and travel accommodations have different redemption values based on the issuer’s rules.
Either way, it’s important to know how to convert your spend into rewards. A simple, flexible redemption structure can go a long way toward maximizing your rewards.
it comes down to
Credit cards can be a great tool for earning rewards on purchases, as long as you use them responsibly and don’t borrow more than you can afford. By paying off what you owe each month, you avoid interest and maximize your rewards to the fullest.
In addition to earning points, cash back or miles, the best rewards credit cards also offer a host of perks and card benefits.
While the world of rewards credit cards may sound intimidating, knowing different ways to maximize your credit card rewards can help you get the most out of your credit card spending.
