Each time you use a rewards credit card, it’s an opportunity to earn rewards in the form of points, cash back or miles. Employing a few key strategies can ensure you maximize your earning potential.
Each time you use a rewards credit card, for both online and in-person purchases, it’s an opportunity to earn rewards in the form of points, cash back or miles. Grabbing these rewards and making the most of points isn’t hard to master, but putting strategies in place can help you maximize credit card rewards.
In a typical year, cardholders can earn hundreds of dollars in cash back, free flights, free hotel rooms and other redemptions. Here are six tips to help you make the most of your reward cards.
6 tips to maximize credit card rewards
1. Use credit, not debit
When you use a rewards or cash back credit card, it’s like you have a built-in discount.
“For consumers with good credit, leading cash rewards credit cards can give you between 1.5% and 2% back on every purchase,” says Patrick Beckman, contributing finance editor for RAVE Reviews.
Beckman advises not to use a debit card and to reach for a credit card instead.
“The most apparent cost of using a debit card instead of a credit card is lost rewards,” he said. Additionally, debit cards don’t offer the same protections as credit cards.
“With a credit card, reporting fraudulent charges is very simple and you don’t have to pay for them,” said Beckman. “However, since a debit card pulls money straight out of your account, it can be much more difficult to get the money back after it’s spent.”
Even though you can find fraud protection on both credit and debit cards, charges to a credit card won’t immediately drain your bank account like charges on a debit card.
2. Take inventory of your spending habits
To maximize rewards, R.J. Weiss, founder of The Ways to Wealth, recommends analyzing your personal spending and budget before even applying for a card to see if the rewards it offers are in sync with your spending habits.
“Identify the credit cards that provide the highest percentage of cash back for categories where you spend the most. For example, if most of your credit card spend takes place at grocery stores, look at the cards that give a higher cash back rate for grocery spending,” Weiss said.
3. Diversify cards to maximize your rewards
To optimize your credit card reward potential, a wise strategy is to have several cards with high reward rates in different categories. For example, you might use one credit card for grocery shopping and another card for travel expenses.
Beckman highly recommends the Blue Cash Preferred® Card from American Express for U.S. supermarket purchases, as it earns an impressive 6% cash back. Just be aware that the 6% ends after spending $6,000 per year in U.S. supermarket expenses, and then you earn 1% cash back thereafter.
If you switch cards to yield better cash back on a night out, you could pick the Capital One® Savor® Cash Rewards Credit Card*, which gives 4% cash back on entertainment and dining purchases.
If you pair the Blue Cash Preferred with the Capital One Savor, you can get maximum cash back for all your meals – at home and from restaurants. The Blue Cash Preferred gives you 6% cash back at U.S. supermarkets and the Capital One Savor gives you 4% cash back on dining. If you used just the Capital One Savor, you’d be getting only 2% cash back at grocery stores compared to the 6% on the Blue Cash Preferred.
Pairing cards can take your rewards to the next level by optimizing benefits in different categories. Most cards have a reward focus, such as travel or gas.
“A travel card … will give you fantastic benefits when it comes to hotels and airlines, but it won’t reward your everyday spending,” explained Eric Croak of Croak Asset Management.
Picking separate cards for your top spending categories will enhance your rewards and ultimately put more cash in your pocket.
“Once you have identified the categories in which you spend the most – whether it’s groceries, gas, travel or dining – you will want to have a credit card that rewards bonus points in those categories,” advises Beckman.
Choosing the best cards to combine for maximum cash back can significantly boost your reward earnings over time.
Additionally, if you want to target travel rewards, you will want to diversify the type of points you accumulate. This is how credit card travel reward aficionados earn free vacations.
4. Watch out for bonus caps and limits
Some cards, like the Chase Freedom Flex℠ or Bank of America® Customized Cash Rewards credit card, put a spending cap on how much you can earn bonus points or cash back on in a particular category. Cardholders should carefully track when these caps are met so they can continue to earn a high level of rewards by using the credit card in their wallet with the best cash back at that time.
”If you do the math on these cards that cap out, like Amex Blue Cash Preferred or Chase Freedom [Flex], you may be receiving less in rewards than if you got a card with no reward limits,” said Kasey Ring, president and founder of Upward Personal Finance. “Do the math before you apply.”
Weiss recommends another strategy to monitor caps and limits – download your credit card provider’s app to track your spending and earning.
“Most of the major card issuers have a section [in their app] that allows you to track your bonus spend for that period,” Weiss said.
5. Keep tabs on your rewards
Checking on your reward progress will make sure you’re getting the most “bang for your buck,” according to Croak. He said monitoring is also important if you have limits on the rewards you can earn, as you might want to switch the card you use if you have maxed out your annual cash back on a certain card.
Furthermore, monitoring rewards also ensures you are taking advantage of a card’s potential, especially if it has an annual fee.
“If the card has an annual fee, you will want to ensure that you are earning enough back to cover the annual fee and more. If your total rewards earning can’t match the annual fee, you will want to reconsider the cards you use,” Beckman said.
You should also check regularly to see whether your card’s rewards have changed. During the COVID-19 pandemic, for example, many credit card issuers changed or expanded their rewards to accommodate shifting spending habits as people spent more time at home. Many credit cards began offering points for purchases such as food takeout and delivery, online grocery orders and streaming services.
6. Always pay bills in full and on time
If you don’t pay your entire balance on time and in full, you are subject to hefty interest rates, which cut into or completely erase your reward earnings.
“Credit cards are notorious for having very high interest rates – anything from 15% to 30%,” said Beckman. “If you carry over a balance on your card from month to month, the interest you pay will negate any value you get from the rewards. You will be earning anything from 2% to 7% in rewards, but as soon as you carry a balance and accrue interest, you will lose most – if not all – of the value.”
The most important caveat for maximizing your credit card rewards is paying off your balance in full each month.
“No credit card rewards will ever be worth more than the cost of high-interest debt,” cautioned Weiss.
Rewards credit cards give you cash back and other benefits just for making your usual purchases.. A starting point for winning rewards is to use your credit card instead of a debit card. You are earning every time you use your credit card, plus you are gaining purchase protection. Then, pick rewards cards based on where you spend the most; you can earn miles from co-branded cards for travel benefits or cash back or points with bonuses for specific categories like dining or shopping.
Finally, it’s important when maximizing rewards to only use your card when you can pay your balance in full. Otherwise, you’ll spend enough in interest to negate what you’ve earned.