Credit card rewards are a useful way to earn miles, points, and cash back for spending money. Some cards also come with valuable perks such as access to airport lounges, extended warranty benefits, TSA pre-check reimbursement, entertainment offers, concierge services, and even insurance coverage for your cell phone. However, not all these benefits are automatically available. So, to make the most of rewards credit cards, you should be aware of all the offerings and avoid blind spots that might catch you off guard. Below, credit card experts highlight mistakes that can nullify the rewards you hope to earn – and how to ensure you fully benefit from your rewards card.
1. Not Paying Off Balances in Full Each Month
The first lesson applies to all credit card users. If you’re using your credit card to accumulate points or miles from everyday spending on groceries, entertainment, household expenses, and fuel, make sure to pay your monthly credit card bill in full and on time every month. “I think the biggest mistake is carrying a balance,” says Ted Rossman, industry analyst at Creditcards.com. “Debt on a credit card is really costly debt. There’s a myth that you should carry a balance to build credit. This is a costly mistake – the best way to use a credit card is to pay on time and in full every month.” In fact, Rossman says carrying a balance does not help improve your credit score; it costs you money in interest. So, as a general rule, try not to carry a balance if you do not have a quick way to pay it off. However, in emergencies, if you really need to put an unexpected medical bill or home repair or car repair on a credit card and pay it off, those might be exceptions. But consider alternatives first. “Rewards programs provide a continuous flow of returns compared to that. If you’re going to make a debt-based purchase that you plan to pay off over time, you’re better off getting a loan or some other form of credit,” suggests Chris Motola, credit and economics analyst at MerchantMaverick.com.
2. Not Choosing the Best Rewards Credit Card
Try to match the rewards credit card to your lifestyle. If you’re aiming for rewards, don’t just sign up for the first option you find or that a friend recommends; make sure to use cards that fit the right types of spending. “Focus on your main spending categories,” says Rossman. “For example, don’t bother with a travel card if you’re not leaving home.” However, if you’re a foodie who spends a lot of your paycheck dining out, you might benefit from a card that gives you points or cash back for eating at restaurants.
It’s also important that your choice of card fits your lifestyle because many rewards credit cards charge annual fees. “Paying an annual fee for a card you don’t fully benefit from is another mistake,” says Rossman. “Switch to something that fits you better. And if you’re paying an annual fee, make sure to use the perks you’re entitled to. Otherwise, switch to a no-annual-fee card.”
3. Not Understanding 0% Interest Credit Card Offers
Rossman emphasizes that 0% interest offers can be a great way to get out of debt and/or spread the impact of large purchases, but make sure to pay it off before the promotional period ends. “After the promotion ends, interest rates can jump significantly,” he says. And a very bad tactic – used by many store credit cards – is to phrase a 0% offer as “deferred interest.” “That means if you don’t pay it off in full before the promotional period ends, all the interest that would have accrued, based on the average daily balance since the beginning of the period, can be charged back to you,” adds Rossman. Just be sure to read the fine print of your credit card agreement to ensure you fully understand the terms and avoid any unwanted surprises later.
4.Not subscribing to all the offers available for your card
Not all credit card benefits are automatically available. “Some need to be explicitly activated,” says Monica Eaton-Cardone, CEO of Chargebacks911. “If you don’t take the initiative, you won’t be able to enjoy the perks.” According to 2021 data from the Consumer Financial Protection Bureau, over a third of cardholders have not actually registered for an online account and downloaded their card app. “This is a huge mistake because the app makes it really easy to track your spending and take advantage of all your benefits,” says Eaton-Cardone.
For example, credit cards related to travel may require you to enroll and subscribe to dining reward programs. Eaton-Cardone states that other high-value travel benefits, such as loyalty programs and airport lounge access, may be contingent upon your registration. “So, download the app and make sure you’re not only aware of all the perks, benefits, and free gifts available, but also registered and subscribed to them,” she says. Even if you don’t have a plan to use all these benefits, it’s good to know what your perks are. “Weird and unexpected things happen all the time,” adds Eaton-Cardone. “There may be a moment when you really need a hotel room or an extra bag for the trip.”
5. Missing out on the initial spending bonus
Your new card may have an attractive sign-up offer, such as 50,000 points if you spend $5,000 in the first three months. However, if you do not reach the required spending level in the specified time frame, you will not receive the sign-up points or mileage bonus. In brief, it’s a “use it or lose it” deal. However, you may also not want to spend a lot of money on unnecessary purchases, so it helps to create a smart spending plan. “Strategic planning can make the difference between enjoying your rewards and losing them,” says Eaton-Cardone. She says it may make sense to put all your monthly bills on your new card or use the card to make a big purchase you’ve been putting off. Just be sure to pay off your balance in full and on time, so you don’t negate your sign-up bonus with high interest charges or late fees.
Leave a Reply