Rewards card holders' biggest mistake? Not using their miles
Dear Cashing In,
I just got a new rewards credit card, and I've been surprised by all the restrictions and caveats and exceptions that there seem to be. It's all very confusing. So what's the biggest mistake you see people make with their rewards cards? -- Eli
If I had to take a guess at the biggest mistake people make with rewards credit cards, just in general, I would say it's not using the rewards they've earned.
A representative of American Express backs me up on this: "I would say our most common mistake is hoarding -- people saving and saving their points for something big and never using them, when there are so many great options for redeeming at so many different point levels."
Hoarding rewards is the equivalent of acquiring a fortune while living in poverty, or getting giddy when you find a 20-percent-off coupon for your favorite store or product and then missing the expiration date. Ending up with nothing when you had the means to get something you really wanted is worse than having nothing to begin with. I don't even like to think about the frequent flier miles I've squandered over a lifetime. It's much more satisfying to think of the trips I took when I finally shelled those miles over -- including, most recently, visits to Italy and Hawaii.
Often, however, rewards go unused not because of intentional hoarding or even forgetfulness, but because the rewards programs are confusing or too hard to use. As you've seen, the fine print on both attaining and redeeming rewards can seem daunting. Problems with redeeming often come from the loyalty program the card is associated with -- say, a hotel chain or airline. Before you start saving for a specific reward, check carefully for caps and blackout dates.
Given the complexity of some programs, there's something to be said for those unglamorous cards that offer a straight point-for-dollar exchange that you can redeem easily. Some examples: Discover has a simple rewards structure with lots of perks, and Chase's Ultimate Rewards program has no blackout dates or caps and a clearly stated value of one point for every dollar spent, each point equaling one cent when redeemed.
Unfortunately, the more specific the rewards, the more complicated the rules. Maximizing rewards with a new card can take a little experimenting, so expect a learning curve, but don't worry too much. You may be disappointed when you try to redeem a reward, especially if you don't do your homework first, but you're not going to get in trouble. The bigger danger is in not redeeming your rewards.
If you can't swing a big trip this year, there are other ways to reward yourself that you might be missing. You can redeem rewards for extra discounts on gift cards. You can take advantage of unique experiences your rewards program offers by perusing the options on the program's website or in your mailbox.
I think we should all make a New Year's resolution to get as many reward points as possible, and to spend the ones we have on something we've always wanted -- whether it's extra cash to pay off debt or an experience we otherwise couldn't afford.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
Published: January 10, 2012
- Card offers on planes – are they worth it? – Credit card applications handed out on planes sometimes come with better rewards sign-up bonuses and other perks, but not always ...
- Foreign ATMs accept US debit cards, but carry backup – U.S. debit cards are widely accepted at overseas ATMs, but carry credit cards, too, to be safe ...
- Splitting reward points from a small business – Credit card rewards usually belong to whoever signed up for the account. But small-business partners should discuss whether to split them up or use them for business expenses ...