You may be wasting your credit card rewards.
At least, that’s the conclusion of an annual Consumer Spending Index released by TD Bank; their late-October study included survey information conducted from March 22 to March 28 from 1,002 consumers. It found that almost one in five consumers (18 percent) have allowed credit card rewards to expire.
That suggests that most consumers — 82 percent — are generally on top of their credit card rewards. But the survey also found that of the 18 percent who sometimes waste their reward points, it’s the millennials who end up wasting them, the study found. Of the 87 percent of millennials who have a rewards credit card, 30 percent of them have allowed reward points to go to waste, as opposed to 19 percent of Generation Xers and baby boomers (8 percent).
That said, we waste food, water, electricity, time and potential — is it so shocking that we would waste credit card rewards, too? Still, if you’re looking for strategies for saving money and not wasting rewards, here’s what you’re probably doing wrong.
[See: 9 Financial Tools You Should Be Using.]
You aren’t paying attention to the conversion ratio. Your points convert into dollars or cents. You need to pay attention to exactly what your points are being converted into. For instance, many credit cards will allow cardholders to redeem their points for store gift cards. But if you’re going to redeem points for a gift card, pay attention to how many points will get you a particular gift card.
“I never want to use 3,500 points to get a $25 card, when I can use 2,500 points to get the same valued card at a different store. The conversion ratios differ dramatically sometimes,” explains Dean Myerow, a Fort Lauderdale-based managing director at Las Olas Wealth Management of NatAlliance Securities LLC, an investment firm.
Myerow also observes that even if you can choose between a gift card for two stores, and the points are the same for those two stores, one store may end up giving you a better value than another. You may not be able to buy all that much with $25 at an expensive department or grocery store, whereas if you get a gift card at a store known for discounts, that $25 may stretch a lot further.
You’re redeeming the points for merchandise. If you want to get the most out of your rewards, then cash, airline tickets or anything other than merchandise is usually the way to go, according to Sarah Hollenbeck, a marketing and PR associate at the retail website Offers.com.
“Many credit card rewards programs have low-hanging fruit that’s not a great redemption value. A rule of thumb is to avoid redeeming for merchandise — the worth of the points you redeem will almost always be way above the item’s monetary value,” Hollenbeck says, adding: “Be cautious about the ability to use your points when shopping on Amazon, a perk that several cards offer. Often, you’ll get a lower value per point when you redeem this way.”
Still, Hollenbeck says that if you want that blender on Amazon, don’t feel bad about exchanging your points for it. She just says that, if getting the best value for your points is really important to you, you would do better if you were able to exchange the points for cash or something representing cash, like a gift card. That said, redeeming points for merchandise is far better than doing nothing with the points.
Stephen Gibson, founder of the website of Vyteo.com, which reviews new products and services, agrees with Hollenbeck.
“Far and away the best credit card rewards systems are cash-back rewards,” he says. “Compared to other rewards programs , the cash rewards cards oftentimes have comparable or more value, and it’s cash so you have no limitations on what you can do with it. … Cash is and is always king.”
[See: 7 Signs Your Romantic Partner is Financially Unstable.]
You don’t take advantage of the sign-up bonus. Some credit cards will give consumers a one-time bonus of, say, 30,000 points, if you spend a certain amount of money in the first few months.
“It’s free money for making purchases you would anyway,” Gibson says.
And, of course, if you aren’t redeeming sign -up bonus points, you have to ask yourself why you applied for the credit card in the first place.
You don’t understand how your points work. Consumers often get stymied when the redemption process is complicated, according to Kimberly Palmer, a District of Columbia-based credit cards and banking writer at NerdWallet.com. Many consumers evidently give up and don’t try to redeem their points.
“One easy way to redeem rewards is to set them to automatically get credited to your [credit card] account once they reach a certain amount,” Palmer says. “In fact, redeeming rewards for account credits is a great strategy because it’s so simple — you don’t have to visit a web portal to select a reward or purchase an airline flight.”
[See: 25 Ways to Fix Your Finances Fast.]
You’re making late payments. It probably goes without saying, but if you make the occasional late payment, or especially if you make regular late payments and carry a balance, you probably aren’t getting much out of your rewards credit card. For starters, many credit cards won’t give you any points for that month if you’re late with a payment. Rewards are even more meaningless if you carry revolving debt from month to month. The fees and interest are all probably going to be far more expensive and outweigh the value of the points that you’ve collected. If that’s currently your situation, the best reward you can give yourself is to not fret about collecting points and instead just focus on eradicating your debt.
More from U.S. News
10 Completely Careless Credit Card Mistakes You’re Making
9 Ways to Save When Holiday Shopping With Credit Cards
8 Ways to Maximize Your Credit Card Rewards
5 Ways You’re Wasting Your Credit Card Rewards originally appeared on usnews.com
