Maximizing Credit Card Rewards: 5 Ways to Earn Big
Early credit cards came in the form of small metal charge coins, issued to consumers by department stores to represent a line of credit. Then, right before the plastic card came about in the 1950s, consumers used charge plates – small aluminum (or aluminum-like) rectangular plates that contained identifying information for both the creditor and consumer. Today, using and managing a credit card is a normal component of personal finance. As of the most recent year reported, about 72 percent, or around 177 million Americans, have at least one credit card.
So many facets impact credit card usage: card APR, card fees, your income, your mood that day, and, of course, those increasingly popular rewards programs. Similar to couponing, many consumers consider rewards programs to be fun. Figuring out how to get cash back and all of those bonus perks without spending a ton of money is a challenge.
CardRatings.com recently published a study on this very topic. The study examined household expenditures in 18 major cities and calculated the potential for cash back rewards based on this spending data. Using this information, CardRatings.com was able to gain insight on how to take advantage of these rewards programs. Here are a few things to keep in mind.
1. Cash back
A card that offers cash back rewards offers a degree of flexibility. The money goes directly onto your card and you can use it for whatever you like. Therefore, when spending your rewards, you need not be concerned with points or whether a specific retailer will accept your earned rewards.
2. Spending patterns
Tracking your purchasing behavior is key to optimizing your rewards, and it’s as simple as reviewing a few months’ worth of statements. Add up how much you spend on dining out, on gas, and on travel, and if one category stands out, choose a card that offers high rewards in that area.
Additionally, rewards programs are designed to promote brand loyalty, which can sometimes be costly. As an example, your card offers you 3 percent cash back when you shop at Electronics Store XYZ, and you need a television. At Electronics Store XYZ, the television costs you $1,000.
However, Store ABC has the same television for $100 cheaper. Overall, even with your cash back rewards, you’ll receive a better deal at Store ABC ($900 versus $970). You wouldn’t shop at a more expensive store just because you had a coupon, would you? This is the same idea — it’s comparing the bottom line when making spending decisions.
3. Card rules and regulations
It’s prudent to thoroughly review all of a card’s policies before deciding one or attempting to earn or redeem rewards. For instance, some cards only allow you to earn cash back on a certain amount of spending at a specific retailer. Others state a maximum amount of rewards you can earn.
A publication by Bankrate talks about bonus rewards such as higher percentages on gas during the summer months and higher rewards when you shop through the cardholder’s online shopping portal. You can use these extra percentages to your benefit.
Considering the cash back percentage is generally only around 3 percent at best and average card interest is much higher, at around 13 percent, you can only truly benefit if you pay your card balance off in full each month. If you are not someone who pays your balance in full each month, a non-rewards card with lower interest may be a better option for you.