This guest post was written by PT Money, who wants you to Save Money, Get Out of Debt, and Live a Frugal Life
Credit card reward programs can be an excellent way to bring in a little extra money each year. Depending on your reward program and how much you spend, you can earn $500, even $1,000, by the end of the year. But there’s a right and a wrong way to earn and redeem your points. Follow these 5 tips to make the most of credit card rewards.
Analyze Your Spending – Before you can know what type of card to get, it’s a good idea to take a moment to determine what type of spender you are. Are you a big traveler, racking up lots of hotel charges and airfare? Do you spend a lot of money on gas, or groceries? What about entertainment? The idea here is to understand what type of spender you are so that you can be sure to only have the reward cards that line up with your current spending. (e.g. someone who commutes using public transportation wouldn’t make the most of a gas reward card).
Avoid Credit Cards with Fees – Make sure that the card doesn’t have an annual fee that might negate any amount you earn from having the reward card. I try to avoid cards with fees all together. If you’ve just got to have a particular card that has a fee, make sure you’re including this fee in your analysis prior to signing up.
Try to Avoid Spending Just to Get Points – Don’t put the cart before the horse. Make sure the rewards cards in your pocket aren’t influencing your spending. If having a reward card will just end up causing you to spend more, don’t get one.
Don’t Carry a Balance on Your Credit Card – This goes without saying for My Two Dollars readers, but make sure you pay off your credit card balances in full each month. Like the annual fees, monthly interest charges will eat up any rewards you plan on earning.
Know When to Redeem Your Points – Before you cash in your rewards, take a second to understand the pay out structure. Most reward programs have a certain level to be reached prior to receiving optimal benefit for your reward. I stick with cash rewards mostly so here’s an example for you:
My credit card reward program will reward me for cash back at these point intervals:
Points Cash Back
2500 $12.50 Check
5000 $25 Check
7500 $37.50 Check
10000 $80 Check
15000 $120 Check
20000 $160 Check
25000 $250 Check
35000 $350 Check
50000 $500 Check
As you can quickly see, the ideal time to get a cash back check would be when 25000 points are attained. Anything less than that and you don’t get optimal value for your points. So make sure you reach your optimal level prior to pay out.
It’s also good to be aware of reward point expiration dates. To avoid expiration, I’ve got into the habit of using my credit card rewards for Holiday spending every year. Giving yourself a self-imposed annual pay out date will keep you from letting points expire. Best of luck.
Do you have any other tips for making the most of your credit card rewards? If so, leave them in the comments below.