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Maximizing Credit Card Rewards: Common Mistakes to Avoid and How to Navigate Them

Updated: Jun 14

Key Takeaways
  • Harnessing the power of credit card rewards can unlock significant discounts on travel, often allowing for free experiences worldwide.

  • Aligning with the appropriate loyalty programs and reward structures in harmony with your traveling patterns and expenses can optimize the benefits accrued.

  • Thoroughly researching and remaining adaptable when booking awards travel is crucial for maximizing redemption value.

  • To get the fullest advantage from credit card rewards, a balance between earning and spending these points or cash back is key.

Earning rewards with your credit card has the potential to provide substantial value each year if done correctly. That requires not just the accumulation and utilization of points but also a vigilant awareness of potential pitfalls. Here are common credit card reward blunders that could diminish your card's worth:

Carrying a Balance

Accumulating interest and fees from carried balances typically negates any rewards earned. Consider this scenario where you own a 2 percent cash back card at a 17 percent APR. A $1,500 expense on this card paid back in $100 monthly installments over 17 months tallies up nearly $200 in interest, overshadowing the $30 in rewards.

Maximizing rewards

means settling your bill in full monthly. If you're currently unable to do so, set rewards aside, reassess your financial plan, and look into cards with introductory 0 percent APR to target paying down your balance.

Keeping Cards That Don't Align with Your Expenses

Maximization also involves ensuring your card's reward structure caters to your spending habits. Your card choices may have evolved or become outdated. For example, your priorities might have shifted from frequent flights to road trips in a newly purchased RV, or perhaps a beginner's credit card you got years ago can now be swapped for one with better rewards.

Bear in mind, any annual fee should be justified by earned rewards or utilized benefits that offset its cost. Reassess your goals and expenditures at least annually, ensuring alignment with your card's bonus categories and staying alert to more beneficial alternatives.

Neglecting Added Perks and Benefits

Frequently overlooked are the array of benefits provided by your card, from airport lounge access to memberships for services like Instacart or Shoprunner. Regularly review your account to take full advantage of such features.

Choosing Low-Value Redemption Options

Redemption value can vary, especially with points. Before selecting cash back, flights, or gift cards, understand the cash value each option represents. Always pursue the option with the highest monetary value that matches your needs.

Excessive Spending for Rewards

If earning rewards necessitates overspending, reconsider your budgeting approach. Treat your credit card like a debit card—spend only what can be covered completely by month's end to dodge high-interest debt.

Failing to Capitalize on Bonus Categories

Not making use of your card's bonus categories is a commonly missed opportunity. Reminder strategies—like noting bonus categories on your card or scheduling them on your digital devices—can help remember to exploit these rewards, particularly when categories rotate periodically.

Accumulating Points Without Redeeming

Consistently claiming points is vital. Saving up indefinitely can lead to devaluation due to inflation, and you risk forfeiture through account closure or inactivity.

The Bottom Line

Even if not incurring losses through interests or fees, overlooking your card's benefits and rewards is undesirable. Dive into the specifics of your card's reward agenda and conceive a strategy for best usage. This averts common miscalculations and prevents the loss of valuable rewards benefits.

Feeling underwhelmed by your rewards? Consider exploring new card options, as the finest ones in the market can tangibly enhance your annual savings.

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