Just put up on their site today, Smart Money has a guide to the good, the bad and the ugly world of credit card reward programs. They used Citibank’s Thank You Network, Bank of America’s WorldPoints; Visa Extras and American Express Membership Rewards as test cases and looked at at the point requirements for five common rewards. After you check out their list of the best value per point chart, they say that the best way to take advantage of reward programs is as follows:
Pay off your balance
The more you spend on interest, the less your points or miles “” and eventual rewards “” are worth.
The more credit cards you’re using, the fewer points you’ll accumulate on each. The exception: Citibank and American Express, which combine points from several credit cards into one account.
Avoid annual fees
In rare cases, credit cards that carry an annual fee can boost the value of your rewards. But for most consumers, it’s just an added cost that eats away at their value, says Arnold.
Resist the urge to spend your points as soon as you rack them up. Issuers tier their programs “” the more points you have, the sweeter the reward. Say you spend 10,000 points on an $80 check from Bank of America and then, a few months later, another 15,000 points on a $120 check. Had you saved those points to redeem all at once, you’d have walked away with an extra $50.
Seek out point promotions
If you’re earning just one point or mile per $1 spent, you’re really missing out. “You can easily rack up double, triple points,” says Arnold. Look to your credit-card statement and your issuer’s web site for bonus points offers.
We use a mileage card for American Airlines and a dividend card from Citi Bank in our house, and have had great success with both. We just got 2 tickets to Chicago to go to a wedding in a few months for $10 thanks to the mileage card (and all my previous business travel overseas) and have received over $150 in dividend checks from Citi on the dividend card this year. Nothing beats free stuff in my mind and though you have to be careful when using rewards cards (be sure to pay off the balances, etc), they are worth their weight in gold for getting stuff you otherwise would have to pay for.