If you’re saving for an upcoming trip or a big purchase, credit card rewards can help you reach your goal. The market for credit card miles, points and cash back is a lucrative one. In fact, Gary Leff, author at frequent flyer site View from the Wing, says it’s become a kind of “arms race” between issuers to offer great rewards.
“It used to be you would have maybe a 5,000-mile sign-up bonus when these cards were introduced and you would earn 1 mile per dollar,” Leff says. “Now, the sign-up bonuses are much bigger, the bonuses for your spending are much greater, the category bonuses are more than 1 mile per dollar.”
Even so, according to a 2018 U.S. News & World Report study, more than half of surveyed consumers don’t regularly shop around for the best rewards credit card. Knowing your options and having a point-earning strategy can go a long way. Here are a few options for earning credit card points.
What’s the Difference Between Points, Miles and Cash Back?
By making purchases with a rewards card, you’ll either earn cash, miles or points — depending on the card issuer’s rewards currency. Sometimes these terms are used interchangeably, but they mean different things.
[Read: The Best Rewards Credit Cards of 2018.]
Miles are the currency typically associated with airline-branded cards and are usually redeemable for air travel and related purchases. However, you may be able to earn miles with other types of cards as well. With cash back credit cards, every time you make a purchase, you’ll earn back money, as either as a credit on your account or a deposit into a linked checking or savings account. Points are generally more versatile and might be redeemed for travel expenses, merchandise and cash back.
Check your card’s terms to see if your rewards expire. Some cards require you to redeem within a certain time frame.
What Strategies Can You Use to Earn Credit Card Points?
Before you start earning points, consider what you really want to do with those rewards, such as traveling or earning points to spend at your favorite store. Also, think about how much time you want to spend tracking your points.
“I don’t feel like I have time to obsess about it,” says Gerri Detweiler, credit expert and education director for Nav, a credit service for business owners. “So I pick something that’s meaningful and achievable, set a goal, and try to reach that goal.”
Leff says aim to earn more than one point for every dollar you spend. Then, pick a few strategies that work for you.
Choose a card that rewards your type of spending. Credit cards aren’t one-size-fits-all. It’s best to choose a rewards card that offers value for your normal spending habits.
“It’s about tailoring the card to your lifestyle — things you’re interested in and would fit into your day-to-day expenses,” says Chelsea Hudson, senior public relations officer and personal finance expert at rebates website TopCashback.com.
Take a look at your annual credit card statement from last year. Where did you spend most of your money, and what did you get back for spending it? The answer could help you figure out if you’re maximizing your rewards potential.
Get a sign-up bonus. Many rewards cards offer an extra infusion of points as an introductory bonus. You’ll earn the bonus either after making your first purchase or spending a certain amount within a set time frame. It may take a few thousand dollars to reach that target amount, but it still may fit into your budget.
[Read: The Best Credit Card Sign-up Bonus Offers of 2018.]
“Divide that number by the number of months you have to earn it,” Leff says. “Often times, what looks like a big number may not be, relative to your own spending.”
Plan to get the card before you have a big expense coming up, like an insurance premium, car repair or vacation. Then, pay off those charges within a few months so you’re not stuck in debt.
Also be sure to check your card’s terms. Balance transfers, lottery tickets or gambling in general, and cash advances may not count toward the spending requirement.
Max out the bonus categories. How issuers structure their rewards programs varies. Cards may have a straightforward rewards program that lets you earn a fixed number of points per dollar spent. Or your card might offer a combination of fixed and rotating bonus categories.
For example, you might get one point per dollar spent on most purchases and three points per dollar spent in a bonus category, like dining out or travel, that changes every quarter. Some co-branded hotel, airline and retail cards offer even more points for shopping at their particular brand.
Align your spending with those bonus categories. Don’t need something in the bonus category for that quarter? “Buy a gift card for future use,” Hudson says. “You’re not busting your budget because you know you’re going to be spending there eventually.”
Use your card for monthly expenses. Maximizing your credit card points doesn’t have to be a full-time gig. You can simply plan to use your credit card for your regular expenses — think utility and cellphone bills, groceries, entertainment spending and gas.
Also, link your credit cards to websites where you spend the most, like Amazon.com, Netflix and your favorite grocery delivery service.
Your issuer might charge you a fee when you use your card for some expenses, such as to pay your rent or college tuition. If that’s the case, Detweiler says you should do the math to make sure the benefit outweighs the cost. If you’re working toward a rewards goal, like earning enough points to get a sign-up bonus or an airline companion pass, then putting those charges on your card may make sense — as long as you can pay them off.
Sign up for special offers. Your card may offer more ways to unlock more points. Don’t just junk those emails. Take advantage of them.
— Use online shopping portals. Think of these as virtual malls hosted by your credit card issuer. You’ll usually earn bonus points for every dollar spent, on top of your regular points, although the retailers available and points potential will vary by card issuer.
— Refer a friend. Enjoying your card? The card issuer may want you to help market its services. Using links the issuer provides, you can invite others to sign up for the card. In return, you may both earn points.
— Check out bank partnerships. If you bank and have a credit card with the same place, a loyalty program may increase the value of your points when you go to redeem them.
Pair up cards to combine points. Most Americans have more than one credit card in their wallet. In fact, people with fair to excellent credit have, on average, more than four credit card accounts, according to a 2017 report from the Consumer Financial Protection Bureau.
If that sounds like you, then it may make sense to use different cards for different kinds of spending. One card may offer a lot of points for grocery purchases, and another might let you earn rewards when you book with your favorite hotel chain.
Some issuers allow you to couple up cards, too. For example, you might be able to earn bonus points on one card, transfer them to another card from the same issuer and redeem the points at a higher value. Check the terms on your cards to see how you can mix and match points.
Add authorized users to your account. You may get an additional sign-up bonus every time you add an authorized user. Double benefit — that person’s ongoing purchases will also count toward your pool of rewards.
However, you’ll be liable for all the authorized user’s purchases, so only add people you trust. Decide upfront who will pay for purchases.
Another option is if it’s allowed, transfer points to someone else in your household who has a card with the program you need.
Get points for business travel. If you own a small business or work freelance, a business credit card can offer rewards in categories like office supplies, travel and advertising.
If you don’t own a business but your job requires travel, you may be able to charge expenses like flights, hotels and dining to your personal card, and pay them off with your company’s reimbursement. But make sure you submit your expense reports immediately after the trip and pay off the card balance as soon as possible. You don’t want to end up paying interest on company charges.
Not every company allows employees to use their personal cards for business expenses, so check with your manager or human resources department first.
What to Watch Out for
Those deluxe rewards programs and promotions are designed to get you into the habit of using your card. But when you earn and redeem rewards, and pay off your balance in full every month, card companies lose money, Leff says. In fact, the card issuer “may be taking the entire amount that they get from merchant swipe fees and rebating that to the customer.”
Credit card issuers want to come out ahead. They may charge annual fees, and if you spend more than you can pay off right away, you’ll be on the hook for the interest. Here’s what you can do to make sure the card you’re researching is worth your time:
Check for limits on points you can earn. Cards might restrict the number of points you can earn quarterly or yearly in a bonus category. If you max out these caps, then you’ll typically get a lower rewards rate on the rest of your purchases in that category. If you know you’ll greatly outspend the cap limit, then consider getting a card that doesn’t limit your bonus categories.
[Read: The Best Travel Rewards Credit Cards of 2018.]
Do the math — is the annual fee worth it? An annual fee is a payment the issuer charges every year to keep your card open. Not all cards charge an annual fee, and some will waive it during your first year. Depending on the card, an annual fee may range from about $40 to $500 per year.
If you spend enough on the card, you’ll earn rewards that offset the fee.
Take interest charges into account. Credit cards charge an annual percentage rate, which is the cost of borrowing money. The average credit card APR is just over 17 percent, according to Bankrate, but rewards cards may have higher-than-average interest rates.
To sweeten the deal, some credit cards offer a zero percent introductory APR. But carrying a balance after that can “tilt the math away from your favor,” Detweiler says.
In other words, rewards you’ve earned could be wiped out from the interest charges. Be sure to pay off the balance before the promotion ends.
Consider your credit score. You typically need good or excellent credit to qualify for a credit card with a competitive rewards program.
Before you apply for a card, check your credit score. If your credit needs some work, you can still apply for rewards cards, though they may offer minimal rewards or charge a higher APR. Focus on building your credit through responsible card use — like making on-time payments — and eventually, you may qualify for a card with better rewards.
Bottom Line
There’s no mystery behind earning credit card points. By knowing where you spend the most and taking advantage of special offers, you can maximize your earnings.
“When you stack the various types of strategies for earning credit card points,” Hudson says, “that’s really the best way to make the most out of your rewards credit card.”
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Proven Strategies for Earning More Credit Card Points originally appeared on usnews.com
