As a personal finance writer, I’ve written dozens of articles about credit cards. Over the years, I’ve picked up lots of tips and tricks on how to choose the best credit card and maximize your rewards. Today, I thought I’d share some of that knowledge to help you get the most out of your credit card and earn more cash back. Here are four simple ways to rack up extra points and miles.
Make Sure Annual Fees Are Worth It
Although it seems like you should avoid annual fees if you want to maximize your rewards, sometimes they can be worth it. Credit cards with annual fees usually come with special perks like free airport lounge access, a bigger sign-up bonus, a higher rewards rate, or even a free airline companion pass.
Sometimes these premium rewards are worth more than the annual fee costs, enabling you to come out ahead. But remember to calculate the dollar value of the perks you plan to use to ensure you’re getting a good deal. If the value of the companion pass your credit card entitles you to is only worth $200 while the annual fee is $300, you may be better off just buying the plane ticket yourself.
Choose the Best Redemption Option
Choosing the best redemption option is also important if you want to maximize your credit card points or miles. For example, when I redeem points from my Chase Freedom Flex card for gift cards or cash back, they’re usually worth 1 cent each. So if I have 7,000 points and redeem them for cash back, I’ll get $70.
But if I use the 7,000 points I’ve banked to make an Amazon purchase, each point is only worth 0.8 cents. That means I’ll only get a $56 Amazon order in exchange for my hard-earned points. Just by choosing cash back or a gift card instead of an Amazon order, I can put an extra $14 in my pocket, which adds up.
Choose the Right Sign-up Bonus
You may think that choosing the credit card with the largest sign-up bonus is the best way to maximize your rewards. But sign-up bonuses typically come with financial strings attached. You usually have to spend a certain amount of money within the first few months of card membership to earn the sign-up bonus. The larger the bonus, the more money you’ll have to spend to get it.
That’s why it’s important to choose a card that has the right sign-up bonus for you based on your spending habits. If you have to ramp up your spending to earn the bonus, then you’re not really saving any money. So review your past bank statements and figure out how much money you realistically spend each month. Then choose a card with a bonus that’s easily achievable based on those numbers.
Don’t Carry a Balance
The average APR on credit cards is a whopping 20.82%. Most rewards credit cards only give you up to 5% or 6% cash back. If you carry a balance on your card and start racking up interest charges, you’ll negate the value of any rewards you’ve earned. So make sure you pay off your balance in full every month if you want to make money with your credit cards.
Do you use rewards credit cards? If so, how do you maximize your rewards? Share your tips in the comments section below!
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Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.
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