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Rewards

How to maximize credit card rewards

Following a few tips can help you ensure you make the most from your rewards cards

Summary

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.

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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 strategies in place can help.

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 make the most of your reward cards.

1. Use credit, not debit

When you use a rewards 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.

“The most apparent cost of using a debit card instead of a credit card is lost rewards,” he says.

See related: Cash vs. credit vs debit: Here’s when to use each payment method

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,” says 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.”

2. Take inventory of your spending habits

To maximize rewards, R.J. Weiss, founder of The Ways to Wealth, recommends analyzing your personal spending before even applying for a card to see if it is in sync with your spending habits.

“From there, 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 says.

3. Diversify cards to maximize your rewards

To maximize reward potential, a wise strategy is to have several cards with high reward rates in several categories. Beckman highly recommends the Blue Cash Preferred® Card from American Express for U.S. supermarket purchases, as it earns an impressive 6% return. But be aware that the 6% bonus ends after just $6,000 per year in U.S. supermarket expense, and a 1% bonus applies thereafter, he cautions.

See related: Best credit cards for grocery shopping

Another pick is the Capital One® Savor® Cash Rewards Credit Card*, especially for entertainment and dining spending.

“You will earn 4% cash back on your meal and fun for date night or going out with friends,” Beckman says.

If you pair the Blue Cash Preferred – which earns a high rate on U.S. supermarket purchases – with the Capital One Savor – which earns a high rate on dining – this strategy facilitates getting maximum cash back for all your meals.

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,” explains 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, he said.

See related: How pairing two cards can boost your rewards

“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.

If you want to target travel rewards, you will want to diversify the type of points you accumulate. This is how credit card reward aficionados earn free vacations.

4. Watch out for bonus caps and limits

Some cards, like the Chase Freedom* or Bank of America® Cash Rewards credit card*, put a spend threshold on how much you can earn bonus points or cash back on in a particular category. Cardholders should carefully track when these thresholds are met so they can continue to earn a high level of rewards.

”If you do the math on these cards that cap out, like Amex Blue Cash Preferred or Chase Freedom, you may be receiving less in rewards than if you got a card with no reward limits,” says 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 says.

5. Keep tabs on your rewards

Checking on your reward progress will make sure you’re getting the most “bang for your buck,” says 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, says Beckman.

“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,” he says.

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 your reward earnings.

See related: How does credit card interest work?

“Credit cards are notorious for having very high interest rates – anything from 15% to 30%,” says 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 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,” cautions Weiss.

Bottom line

Credit card rewards can essentially mean free earning on the purchases you already make if you use them correctly. A starting point for winning rewards is to use your credit card instead of a debit card. You are earning every time your credit card is used, plus you are gaining buyer 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 is 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.

*All information about the Bank of America Cash Rewards credit card, Capital One Savor card and Chase Freedom has been collected independently by CreditCards.com and has not been reviewed by the issuer. These cards are no longer available on our site.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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Credit Card Rate Report Updated: October 14th, 2020
Business
13.91%
Airline
15.50%
Cash Back
15.85%
Reward
15.75%
Student
16.12%

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