It is best to use a rewards card for everyday purchases that you pay off by the due date each month, in order to prevent interest charges from eating into the rewards you earn. The other key to using a rewards card is redeeming your rewards regularly, so you can enjoy the benefits and reduce the risk of rewards devaluation.
In general, you can use a rewards card to earn points, miles or cash back, either by making purchases with the card or by spending a certain amount over a designated time period. You may then redeem earned rewards for a wide variety of things, such as statement credits, gift cards, travel, and more. Rewards cards are available to people of all credit levels, though the best rewards cards typically require at least good credit to qualify.
How to Use a Rewards Card for Maximum Value
Pay your balance in full and on-time.
Rewards cards often carry high interest rates, so make it a point to pay the balance in full by the due date every month. Otherwise, the interest charges will quickly negate any rewards you’ve earned. Some issuers may also suspend or revoke your rewards for late payments.
Take advantage of 0% APR offers.
Consider a rewards card with a no-interest promotional period to temporarily counter the card’s high interest rates. You’ll earn rewards on purchases while you pay off the balance a little at a time, interest-free. Note that if you don’t pay off the entire balance before the intro rate expires, the remaining balance will be charged interest at the card’s regular APR.
Weigh your spending habits before you choose a rewards card.
For example, if your biggest annual expense is groceries, don’t bother with a travel rewards card. Consider a card that offers bonus rewards on grocery purchases instead.
If you’re into simple rewards, look into a cash back rewards card with a flat earning rate on all purchases. And if your card has an annual fee, make sure you’ll spend enough on the account every year for the card to pay for itself with rewards.
Redeem your rewards wisely.
Credit card rewards are usually worth 1 cent apiece, but some redemption options may be worth less. So make certain you’re getting at least a 1:1 ratio when you redeem. Also, familiarize yourself with the rewards program’s rules to know for sure when, or if, your rewards will expire.
Beware of devaluation.
Without warning, credit card issuers can raise the number of points or miles required to redeem for some options, meaning your earned rewards could be worth less when it comes time to redeem. It’s best to redeem rewards regularly to reduce the risk of devaluation. Cash back rewards, on the other hand, never lose value, no matter when you redeem them.
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