Jean Chatzky
Do one thing: Looking for a new rewards credit card? Review your purchases for the last few months or the past year to see what type of card would work best for your spending habits.
Earning the Most Rewards
For a while, I was like a lot of people who kept their credit cards tucked away after paying off some debt they had incurred early in my career. Over time, though, I realized that there are ways to maximize your rewards to get the most from your credit card accounts.
Since then, my rewards have taken me around the world, with free flights, hotel rooms, and other upgrades.
While credit cards can tempt some people to spend more than they have on hand, if you know how to play your cards right (pun intended), you can reap the benefits and still avoid high-interest debt.
My Favorite Credit Card Reward Hacks
Want to know how to get to those rewards faster? Put everything on your favorite rewards credit cards. You may be thinking, does she really mean everything? And yes, I do mean everything.
Automate Your Payments
Full disclosure: This hack only works if you know that you will 100% pay off the credit card at the end of the grace period. To make sure you do that, you need to put the payment on autopilot by setting up an automated payment with your financial institution that clears the balance on the rewards card on or before the monthly due date. (You can also set a calendar reminder a few days before the bill comes due as an extra safeguard against making a late payment.)
Real-life tip: The goal here is to run even your biggest expenses through that credit card because that is how you can rack up more points and perks. Those expenses can include all of the following:
- Car payments
- Insurance premiums
- College tuition and student loan repayments
- Monthly grocery expenses
- Cell phone bills
- Rent and mortgage payments
- Monthly utilities
- Down payments on vacations (or wedding venues)
The important thing is to load all of your expenses on the card that you are trying to gain the most rewards on. When you do that, you will get to the rewards more quickly.
Build a Portfolio of Keeper Cards
Certified financial planner Chris Diodato frequently asks clients how far they want to go down the rabbit hole when getting more strategic with credit card rewards. “For most,” he explains, “the preference is to build a Rolodex of ‘keeper cards’ that have benefits which outweigh the fees.”
- Rewards Cards for Travel. For example, Diodato says he often recommends hotel cards for those who travel, which can typically have a $100 annual fee but provide upgraded status and a free hotel night stay each year – a benefit that typically far outweighs the yearly price of the card.
- Airline Cards. “Airline cards can also be beneficial if a client is loyal to a particular airline and frequently pays for checked bags, as most cards offer free bags as a benefit.” And pay attention to the fact that certain cards pay more for specific things. My flights go on a card that pays 5x points on flights booked directly with airlines, for instance. My train tickets (I’m a frequent passenger on the Northeast corridor) are 2x what I spend there- and gave me a 40,000 point bonus for signup. In other words, details matter.
- Other Loyalty Cards. If you aren’t loyal to a certain airline or hotel group, look for a travel card that’s not brand-specific and will allow you to use your points on a number of air carriers and hotel chains.
And, if you’re not sure you’ll redeem points at all, then consider looking for a card that gives you a percentage of cash back on every dollar spent. After all, cash can be used (almost) anywhere these days.
Shop Around
Like so many things in life, it pays to shop around.
- Narrow down the type of card you want.
- Take a look at the various cards in that category.
- Use several different card comparison websites. (Some websites earn money when people buy the products they feature, so it’s important to look at several websites, not just rewards cards.)
- When you find a few that look promising, compare those with the cards offered by your credit union or bank.
- No matter which reward card you choose, carefully read the terms and conditions. The more research you do, the better prepared you will be to pick a card that best meets your needs.
Proceed With Caution
In a 2023 report, the Consumer Financial Protection Bureau found that the dollar value of rewards earned by U.S. cardholders exceeded $40 billion for most credit card issuers in the previous year. While that seems like a bundle – and it is – it’s important to remember that not everyone benefits from using rewards cards.
It’s true that those who pay off their balances at the end of the month, every month – known as transactors by credit card issuers – can increasingly benefit from certain credit card use.
But when you can’t pay off your balance, as mentioned previously, and you are forced to let some (or most) of the debt revolve, the cost of interest and fees can quickly exceed the value of rewards you may have earned.
With reporting by Casandra Andrews
