Rewards credit cards – though they can indeed be rewarding – don’t automatically send the cardholder to paradise. Rewards often come with fine print, and like any credit card, a rewards card can be costly if used incorrectly.
A CardRatings.com article titled, “6 Ways to Maximize Your Rewards Credit Cards” offers rewards seekers six vital tips for getting the rewards they signed up for – and nothing more.
“Pay your balance every month” is the first rule for maximizing credit card benefits, according to the article, which shines lights on logic to make this first point clear.
“Even carrying a balance for just one month on a rewards card with a high annual fee and APR could negate the card's rewards,” the article says, citing “First Comes Love, Then Comes Money” authors Bethany and Scott Palmer.
"If you find that you're paying $300 to $400 in fees [on a travel rewards card] and you see that an average flight is the same price, you might be shooting yourself in the foot," Scott Palmer told CardRatings.com writer Christina Couch.
Finding hidden fees – not only annual, but also fees associated with redeemed rewards like taxes, baggage and miscellaneous costs. – is second on the list.
"British Airways charges fuel surcharges on award flights which can be as much as $500 to $600," Tim Winship, editor-at-large for SmarterTravel.com, told Couch. "That's quite shocking to a lot of people."
Calling your card issuer and having them put it all on the table is the best way to discover hidden fees.
The third tip, “Know the true cost,” exposes “the catch” that usually comes with an eye-grabbing deal.
"If there's an annual fee [on the card] and you have to spend $20,000 to get a $100 gift card, is it worth it?” asks Thomas Fox, community outreach director for Cambridge Credit Counseling Corporation in Agawam, Mass.
The fourth and fifth tips are general rules of thumb for life that especially apply to spending money – “Know your limits,” and “Stick to your budget.”
By “Know your limits,” Couch means that blackout dates, maximum rewards caps and restrictions should all be evaluated.
“Knowing your card and planning ahead can help you maneuver around your card's limitations and make the most of your rewards,” Couch says.
Meanwhile, “keeping one eye on your debt and the other on a specific rewards can help you stay fiscally focused and avoid big credit card bills,” according to Couch.
Lastly – and perhaps the wild card to more rewards and less debt – “Stay on the bank's good side.”
“Credit card companies legally have the right to modify or cancel their rewards programs at any time. They can also choose who stays in the program,” Couch says, so “make payments on time, keep your debt well below your credit limit and call your card issuer ahead of time if you know you can't make a payment.”
