Getting the most out of your rewards credit card is easy with these 10 tips
Rewards credit cards are a mixed blessing. While they offer the promise of free travel, points, or even cash, at 1 or 2%, most people never accumulate a lot of rewards. It was this realization that caused me to change the way my wife and I use credit cards a few years ago.
With just a little planning, it’s easy for most anybody to rack up enough rewards to make a meaningful impact on your budget. Using one of the best rewards credit cards, many families can pay for a vacation every year or so just from using the right card. With that in mind, here are 10 tips on maximizing your credit card rewards.
1. Use the right card: The amount of cash back and other rewards offered by many credit cards varies depending on what you purchase. For example, for groceries, it’s hard to beat the Blue Cash Preferred® Card from American Express, which offers 6% cash back on the first $6,000 spent each year at stand-alone supermarkets. If you spend a lot of gas (and who doesn’t?), the PenFed Visa® Platinum Cash Rewards Card gets the top spot with 5% cash back at the pump. The point is to make sure you are using the best card, particularly for larger purchases.
2. Everyday expenses: Once you have the right card, make sure you use it for stuff you buy every day. Whether it’s groceries, eating out, gas, or entertainment, these expenditures add up fast. By purchasing them with a rewards card, you’re building up your rewards balance. I’ve found that over the course of a year, everyday purchases can generate enough in rewards to pay a significant part of our annual vacation.
3. Utilities: Many utilities allow you to pay your monthly bill with a credit card. Not only do you get the benefit of a rewards credit card, but you can also set up the payments to occur automatically. You’ll never forget to pay the bill and you avoid the hassle of writing out a check. We pay our cell phone, cable, internet, water, and trash collection with plastic.
4. Special offers: Credit card companies compete hard for your business. Just a quick look at our list of credit card deals reveals how far an issuer will go for new cardmembers. From free airline tickets to bonus points to cash, some cards will pay a princely sum when you sign up for a card. The Chase Sapphire Preferred® Card, for example, offers a bonus worth $400 in a statement credit or $500 in travel.
5. Education: With one child in a private high school and another in college, tuition is a big part of our monthly budget. We’ve paid for our son’s college education, including his textbooks, with a credit card. It’s an expensive purchase, but with the card, we’ve earned 2% back.
6. Business expenses: All of my business expenses are charged to a rewards business credit card. I’m also an employee of a company and have to travel from time to time. All of my travel expenses go on my personal rewards card. The result is hundreds of dollars each year in free money.
7. Charity: There are several charities that we donate to each year with a credit card. For us, this is changing a bit as we just opened a donor-advised fund for our charitable giving. But over the years we’ve given a lot of money to good causes via credit cards.
8. Pay Your Balance in Full Every Month: To maximize your rewards, it’s critical that you pay your credit card bill in full each month. Rewards cards typically have higher interest rates that other low interest cards. The higher rate is not an issue if you never carry a balance. But if you do roll your balance over from month to month, the interest payments can easily erase the benefits of the rewards. If that describes your situation, you’re better offer with an interest free credit card.
9. Travel: All of our travel is charged to a travel rewards credit card. The best cards give you 2% in rewards at a minimum, with some, like the The Priceline Rewards™ Visa® Card, offering up to 5%.
10. Five Percent: Speaking of five percent, there are several cards that offer 5% cash back on categories that change every three months. We track the 5% rotating categories here, which are offered on card by Citi, Discover, and Chase.
If you maximize your credit card rewards in other ways, share your tip in the comments below.
Published or updated December 18, 2012.