To maximize your credit card rewards, start by comparing credit card offers to make sure you have the most rewarding cards for your spending habits. Then, use whichever card has the highest rewards rate for the purchase category whenever you buy something, and pay the cards’ bills in full monthly to avoid interest. Finally, redeem your rewards regularly in order to maximize your enjoyment.
That’s how to go about it at a high level. Of course, there’s a bit more involved in maximizing your credit card rewards, and you can see the details in the step-by-step list below.
How to Maximize Your Credit Card Rewards
Get a card with rewards that match your spending habits.
It’s important to find a card that fits your lifestyle. For example, there’s no point in investing in an airline credit card with a hefty annual fee if you fly only once a year. Rather, if you’re a frequent traveler, dine out regularly, or spend a lot on groceries, for instance, find a rewards card that will pay you extra for those purchases. Or, if you want something less complicated, get a card that pays a flat cash back rate on all of your purchases.
Below, you can see some of the top rewards card options available right now.
This is known as the Island Approach. For example, if you have a card that earns 5 points per $1 spent on gas, you could use that card primarily for gas purchases and put your groceries on a card that offers a high rewards rate at supermarkets.
On the other hand, if you have a card with a big spending requirement for an initial bonus, you might want to focus your purchases on that card until you qualify for the bonus.
Avoid any late or missed payments, too. Not only will a late fee further eat into your savings from rewards, but you could end up forfeiting any rewards you’ve earned altogether.
Know each card’s rewards terms.
In addition to understanding when exactly you will earn rewards and how quickly those rewards will be credited to your account, it’s important to make sure any spending requirements for sign-up bonuses are attainable. Also, familiarize yourself with the card’s ongoing rewards and redemption rates. Rewards come in three main currencies: cash back, points, and miles. Cash back is straightforward, but points and miles can be redeemed for many things, including cash, gift cards, merchandise, charity donations and more. Rewards points and miles often have different values when redeemed for different things, too.
Try redeeming miles or points periodically rather than stockpiling them. Rewards generally don’t expire as long as your account is in good standing, but in some cases, you could lose earnings if there’s no activity on your account. And if you close your account, you will lose all of your unredeemed rewards. Plus, if you have points or miles, the issuer can devalue them at any time.
Redeem for the most valuable option.
Rewards cards, particularly points and miles cards, often have multiple redemption options. For example, you might be able to redeem your rewards for cash back, travel, gift cards or merchandise. Some cards may offer different redemption values for different options – for instance, a point may be worth 1 cent toward travel and 0.5 cents toward cash back. Therefore, to maximize credit card rewards, you should redeem for the most valuable option.
Take advantage of initial bonuses.
Some credit cards offer bonus rewards for spending a certain amount within the first few months. If you get a card with this type of bonus, you should make sure to spend enough to qualify, provided that it doesn’t make you overspend by more than the value of the bonus. The best time to get a card with a big initial bonus is right before you’re about to make a big purchase, so you can earn the bonus quickly and offset some of the cost of the big purchase with your rewards.
Cash back on credit cards rewards cardholders for making purchases by returning a percentage of the money spent. The accumulated cash back rewards can then be used in a variety of ways, such as paying your credit card bill, getting a check, or making a direct deposit to a bank account.… read full answer
Exactly how cash back rewards work varies by credit card company and even by individual card. But there are some aspects of the process that are pretty much the same no matter what, and it’s a good idea to understand how things work at a high level.
Here’s an overview of how cash back works on credit cards:
Earn a percentage of the amount paid every time you make a qualifying purchase with your cash back credit card.
Wait for the cash back rewards to post to your account. This usually takes 1-2 billing cycles.
Use the accumulated cash back for a statement credit, check or direct deposit. Some cash back credit cards also allow you to redeem cash back toward travel expenses, gift cards, and charitable donations, among other options.
As you can see, it’s pretty simple to earn and use the cash back on your credit card. You can find a more detailed explanation for each part of the process below.
How Earning Cash Back Works
Every time you use a cash back credit card to make a qualifying purchase, you earn a percentage of the amount paid. To maximize your cash back rewards, make sure to evaluate your spending habits and choose a card that suits you.
Ongoing rewards: The average cash rewards card offers around 1% back on all purchases. Keep in mind that some cash back credit cards offer cardholders a flat percentage back on all purchases, while others offer higher cash back percentages for popular spending categories, like dining or travel. It is also worth noting that certain cards offer a higher earning rate on bonus categories that change every quarter and require activation.
Initial bonus: Many cash back credit cards offer initial rewards bonuses for spending a certain amount within the first few months after opening an account.
Other ways to earn extra cash back: Some cards offer cash back bonuses for referring a friend or meeting an annual spending threshold.
How Redeeming Cash Back Works
You can redeem cash back rewards by logging in to your credit card issuer’s website and clicking the “Redeem Rewards” link (which will be worded slightly differently for each issuer). In some cases, you can also redeem cash back through the card issuer’s mobile app or by calling the number on the back of your card.
Redemption options: Cash rewards can usually be redeemed for a statement credit, check or direct deposit. You may also be able to redeem for travel expenses, merchandise, gift cards and charity. Some cards may allow you to set up automatic redemption, too.
Restrictions: Some credit card companies require you to earn a minimum amount of cash back before you can redeem.
Cash back expiration: Usually, cash back rewards won’t expire as long as your account is open and in good standing. Sometimes, however, cash back will expire after a specific period of time. This happens either because your card has been inactive or because a certain period of time has passed since you earned the rewards.
Rewards devaluation: Unlike points and miles, which have a value set by the card issuer, cash back can’t be devalued.
It is worth noting that the best cash back credit cards require good or excellent credit for approval, though there are options for people of all credit levels. Similarly, some cards charge annual fees in return for higher earning rates, but many cash rewards cards have no annual fee.
For more options, check out our editors’ complete picks for the best cash back cards on the market right now.
Cash Back vs. Miles & Points
It is worth noting that cash back is not the only type of rewards that credit cards offer. The others are points and miles, which you’ll see more often with travel cards. While points and miles have different values depending on how they are redeemed, cash back rewards generally have a fixed cash value.
The best way to use credit card points has been travel since 2014, according to WalletHub research. But that’s not a rule across the board. The best way to use credit card points will vary depending on what credit card you have. Your points could be worth just as much (or even more) in cash back or gift cards, so it’s a good idea to check the value of all the redemption methods before you redeem your points.… read full answer
The best way to find out what your points are worth is to log into your credit card account online, look for a rewards redemption section, and see how many points are needed for merchandise, cash back, gift cards, and travel. Then, find out how much you’d pay for those things outside of the redemption portal and do a points-to-dollars comparison. For example, if 100 points gets you 75 cents of a gift card, or $1 in plane tickets, you should go with the plane ticket.
Exactly how you redeem credit card reward points varies by credit card company, but most credit card users can redeem reward points online through their account summary page. Some credit card issuers also let you redeem rewards over the phone. Credit card reward points may be redeemable for cash back, travel purchases, gift cards, and more, depending on the card.… read full answer
Once you redeem your credit card reward points, they’ll be subtracted from your rewards balance immediately and your account will be credited within 1-3 weeks, if applicable. In some cases, reward points will expire if you do not use them by a certain time.
Here's how to redeem credit card reward points:
Log in to your online account and head to “Account Summary.” Specifics will vary by issuer, but your rewards will usually be featured on a main account page.
Click on “Rewards Balance.” The exact wording may differ depending on the issuer. Once you click on your rewards balance, you’ll be taken to a page with your total amount of unredeemed rewards, and information about your redemption options.
Select how you’d like to redeem your rewards. You may be able to redeem reward points for travel purchases, cash back in the form of a check or statement credit, merchandise, or gift cards, depending on the rewards card.
Redeem your rewards. Once you redeem your credit card reward points, the points will be deducted from your rewards balance immediately. If you’re redeeming for statement credits or covering past purchases, your account will usually be credited within a week. If you redeem your points for gift cards or merchandise, you can expect them to arrive in the mail within 2-3 weeks.
While many rewards cards will let you choose from multiple redemption options, you’ll usually get the most value with one in particular. For example, travel rewards credit cards will often give you the most when you redeem your points for travel purchases, and your rewards may be worth less if you redeem them for cash back or gift cards.
On average, credit card reward points are worth 1 cent each. Most major credit card issuers, like Chase, Capital One and American Express, advertise that your points will not expire as long as your account remains open. But you should check the exact terms and conditions of your specific credit card to make sure you don’t lose any rewards you’ve earned.
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