5 Tips for Optimizing Credit Card Rewards

Credit Card RewardsLooking for a great way to bring in some extra money every year? Look no further than credit card rewards.

If you pick the right credit card rewards programs and use the card for the majority of your spending, you could bring in an extra few hundred each year.

Before you head down this road, there are some things you should know to make the most of your efforts.

Check out these five tips for optimizing credit card rewards.

1. Understand How and Where You Spend Your Money

It’s a smart move to think about what type of spender you are, before you run out and get the first cash back rewards card offered to you. Do you travel a lot for work or leisure? Do you spend a lot of money on hotels and flights? What about fuel? Do you spend a lot of time on the roads burning gas?

You get the concept here. Determine what type of spending you do and pick the cards that make the most sense for someone like you. (e.g. if you take the bus to work each day, then a card that rewards you for fuel expenses isn’t going to work for you).

2. Skip the Cards with Annual Fees (In Most Cases)

Standard advice when it comes to credit card rewards is to avoid cards that have annual fees. This sound reasonable as an annual fee would tend to cancel out some of the rewards you are earning.

Personally, I do try to make it a point to not have a card with an annual fee. If you find yourself with one of these cards then be sure to do an analysis to see if the difference in rewards/cash earned makes it worth keeping.

3. Don’t Spend Money Just So You Can Earn Rewards

Don’t let the tail wag the dog here. Your goal is not the most credit card rewards regardless of the means to get there. Your goal is the most credit card rewards given the amount of spending you normally do.

I turn off all the emails that credit card companies send me that might try to influence me to spend when I otherwise would not. I also stopped all the junk mail. I suggest you do the same. You decide when to spend your money.

4. Absolutely No Balances…Ever!

I hoping this goes without saying for all of my money savvy readers, but please pay off all of your credit cards in full each month. Just like with those tricky annual fees, the interest charges you pay on your balances cuts into your rewards earned. Plus, it’s a sign that you are spending money you don’t have. Don’t spend money you don’t have.

5. Be Smart About Redeeming Rewards

Be sure you understand how the card company is going to payout their rewards before you just start redeeming points. Many reward programs are going to have specific teirs that you need to achieve before you can redeem the ideal/optimal number of rewards.

I primarily roll with the cash back cards (highly recommended unless you are a travel junkie) and here is an example of how I redeem rewards.

This particular card will allow me to redeem points for cash at these tiers:

Cash Back Points

5000 $25 Check
7500 $37.50 Check
10,000 $80 Check
15,000 $120 Check
20,000 $160 Check
25,000 $220 Check
30,000 $300 Check
35,000 $350 Check
50,000 $500 Check

It’s plain to see, the most advantageous time to redeem the points would be when I’ve accumulated 30,000 points. If I were to redeem points at any earlier time, I wouldn’t be taking full advantage of the program. Be sure you attain your ideal tier prior to pulling out points for cash.

It’s wise to also be aware of the date that your points will expire. Personally, I use a lot of my points for spending at Christmas time, so I’m prone to always check them annually. You should implement a similar rule or place a note on your calendar to remind you. Good luck.

Need more tips for making the most of your reward card efforts? Check out this video we made:

I know I have some very skilled readers who optimize their credit card rewards far better than I could imagine. Please share your tips below.

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Last Edited: February 6, 2013 @ 6:35 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.