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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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.


  1. DoughRoller says

    I didn’t realize that some cash back cards pay out at different rates depending on how much you redeem.  I don’t think my cash back card works that way, but it’s good to know for those cards that do.  Nice catch!

  2. banking deal community says

    I currently have a Bank of America credit card in which I earn no rewards from using. Because I’m starting to use it more and more, I’ve decided it’s time to switch to a credit card where I can earn rewards. I’m wondering if people have suggestions on the best credit card to get based on the rewards/incentives associated with it?

    • Philip Taylor says

      You can find my recommendations here: https://ptmoney.com/credit-cards/

    • Discover has a pretty good rewards program.  Some of their business partners allow you to purchase their gift cards at reduced costs.  For instance, you could purchase a $25 gift card for $20 in cash back rewards.  You could also redeem your cash back in other ways.  Check out the discover.com website.  
      Another card I use is the Amazon Visa.  You accumulate points based on your purchases.  Depending on the type of purchases you make will dictate the points you earn.  Check out their points program online.  You could use your points to make purchases on Amazon, receive cash back, or apply it in other ways, such as travel, dining, etc.  
      Good luck. 

  3. wow, thanks so much for that great info. i didn’t know about that website.

    i guess i was under the impression that each person had a fixed amount of “available credit” and if you reach that amount they start denying you for cards, so i figured i’d cancel a few and give myself some room to get my limit increased on the other card. but it doesn’t work that way, i realize now.

    i have 5 cards and i won’t cancel any of them. and i will call american express and ask them about raising my limit.

    thank you again!!!

  4. @zach

    I would strongly advise against cancelling your other cards for two reasons:

    1. Credit History – These cards show your credit history and prove that for quite some time people have trusted you to pay your bills and be a responsible borrower. You don’t want to erase that history by cancelling the cards.

    2. Available Balance – Even though you aren’t using the cards, having an overall high available balance improves your credit score. By cancelling your other cards you would be lowering your available balance. Not a good thing.

    To increase your AmEx credit line I would just call them and ask. If they say they can’t, ask them when you should call back and ask again. Overtime they will increase your limit. Especially if you’re using the cards each month and paying it off.

    For more on this, I would do some research at http://www.nfcc.org/

  5. i have a somewhat related question…

    i’m paying off my credit cards, and have a little ways to go, but once i have them all paid off, i plan on only utilizing my american express blue cash card, and putting my utilities and regular purchases on that card, and paying off the balance monthly.

    i have other cards open right now (currently with balances, but everything will be paid off within 6 months), and several of these cards have limits in the thousands, one of which is $10,500 and another is $5,000.

    ideally i’d like to get my limit increased on my blue cash card, which is currently at $2,000, because it’s the only card i want to use. would canceling my other cards, waiting a few months, and then requesting a credit limit increase on my american express card be the way to go about getting my $2000 limit upped?

    i should note that when i applied for my american express card, my credit scores were in the 670 range. now, they’re between 700 and 720.

    thanks for your advice! and i love your blog. you talk about real issues that real people have and it’s really invaluable. 🙂

  6. Thanks for this great advice. Sometimes we so caught up in the “credit cards are evil” mentality that we forget that, when used properly and responsibly, there are some great benefits.