How to Use your Credit Cards’ Reward Points Wisely

By | February 18, 2013

Almost every credit card comes with a reward points system, using which you can collect and accumulate reward points that can be later exchanged for goods and services. A lot of reward systems are cash-back systems, where you get a discount or get cash-back on any purchase made using that card. When you compare credit cards, it is a good idea to compare their reward systems too.

A study from Colloquy and Swift done in 2012 found out that Americans earned an average of about $600 as reward points in the year 2011. That means you could end up losing as much as $500-$1000 if you do not use your reward points system fully. Here we tackle the question of using them wisely so you do not end up like 40% of respondents of that study, who failed to use their reward points in any way.

More about the Reward Points System

One thing to note about reward programs, and it does not paint them in good light, is that they often come with an annual fee over and above the annual fee required to maintain the card. These fees normally are around $75 to $150, and could prove costlier than what you get back as cash back if you do not use your card much. Therefore, it is important that you first understand how much you intend to use your card before applying for a reward system with an annual fee.

Choosing the right Reward System

To use your rewards system properly, you need to apply for and get a reward system that fits your requirements. Given the different types of rewards systems on offer, this is far from hard. An example of how to choose one that suits is: If you frequently eat in restaurants, while traveling or otherwise, then you should opt for a system that rewards you for your purchases and spending in restaurants. Further, if you travel a lot by your car, then a rewards system for your gas spending will prove more useful to you.

Using the Rewards Points Correctly

The biggest factor to remember about these points is that many cards have an expiry date before which you have to use your points; otherwise they get phased out, and you lose them forever. Therefore, keep an eye on any such deadline, and remember to redeem your points before such a deadline.

In summary, reward points are not a reward for nothing. They often come with annual fees, and encourage you to spend more, which is far from the wisest thing to do if you do not have the budget to spend. Therefore, you should consider all the points listed here so that you can use the rewards system of your credit card wisely. Lastly, when you compare credit cards, you should not forget to compare their rules regarding reward points.