Making the Most of Credit Card Reward Programs
If you’re like most Americans, you get at least one credit card offer a week. With this kind of competition, credit card companies are desperate to stand out from the crowd.
Their solution? Reward programs. From contributions deep discounts on a new car to free airline tickets to good ole’ fashion cash, every credit card today it seems has some kind of reward scheme.
How do you make the most of these programs? Here are five easy tips.
#1 Ask yourself: Do I carry a monthly balance?
If the answer to this question is yes, even sometimes, then reward cards are probably not for you. The price to a reward card is usually a much higher APR. If you can’t pay off your balance at the end of each month, then the interest alone will far exceed the value of any possible rewards.
#2 Use your discount privileges.
Even before you’ve charged enough to earn a reward, most cards will entitle you to exclusive discount privileges. Some offer online coupon codes, while other give discounts on gas and even groceries at selected stores. Be sure you know what your privileges are.
#3 Exercise caution when racking up charges.
Sure, you need to spend money to earn rewards. But spending beyond your means puts you in danger of carrying a monthly balance (see #1). Instead of using your reward card for discretionary spending, try using it for budgeted expenses, such as utility bills. You’ll know you have the cash to pay them off each month and you’ll still rack up reward points.
#4 Be a savvy consumer.
There’s a reward out there for just about every consumer. If you’re a frequent flyer, then miles rewards are a great option. Of course, if getting on a plane puts you into a panic, then gasoline rewards are a better pick. Although, make sure your card’s selected vendors are located nearby-otherwise you might pay more to get there than you’ll earn from your free tank.
Are you saving for a new car? Then check out the GM card, which lets you earn 3% toward the purchase or lease of your new vehicle. What if you’re a saver, not a spender? Cash-back cards are a great option. And so is the Citi card, which rebates 6% of all your utility bills and applies it directly to your mortgage principal.
#5 Look before you leap.
Before you sign on the dotted line, you need to run some numbers. For example, if you put $5,000 a year on a miles reward card that charges a $60 annual fee, it’ll take you 5 years to earn a free ticket. Meanwhile, you’ll have shelled out $300 in fees for a flight you might have gotten for cheaper anyway on a discount travel site.
#6 Utility.
Check to see how what you can use the rewards or points for. One of my favorite cards is the Starwood Preferred Guest Card from American Express, because you get 3 points for every dollar you spend at a Starwood property and you are able to transfer those points to many airlines. Depending on the airline, you get a 25% transfer bonus for transferring Starwood points to your Frequent flyer account. Some examples are American Airlines AAdvantage and Delta Skymiles.
The morale of the story is: don’t just jump at the first offer that comes in the mail. Get on-line and do some research. There are at least a dozen sites offering credible reviews of virtually every reward card out there. Some even have a reward cards calculator, which can recommend your best choice based on your monthly spending patterns.