Your Rewards Credit Card Could Be Failing You. Here’s What You’re Doing Wrong
Maximizing credit card perks isn’t just about spending more. It’s about avoiding hidden traps that erode the value of rewards.
Rewards credit cards can be a powerful way to get more value from your everyday spending. Each purchase can earn you points, miles or cash back that you can redeem for travel, statement credits, gift cards and more.
However, simply having a rewards credit card is not enough to unlock its full potential. The way you use your card and the strategy behind it determine how much value you actually receive from your rewards.
To help you get the most from your credit card, we’ve highlighted six common mistakes that could be holding back your rewards strategy and offer tips on how to avoid them.
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Choosing the wrong rewards credit card
You can choose from many rewards credit cards designed for different types of customers. It’s important to carefully review the card’s rewards program to make sure you choose a card that’s right for you. If you don’t, you’ll find it difficult to earn decent rewards based on your regular spending.
As you shop around for a rewards card, carefully review how the rewards are structured and look for a program that aligns with your lifestyle. If you’re a frequent traveler who often purchases airfare and hotel stays, a travel rewards card can help you earn rewards on those travel-related purchases.
But if you rarely travel and instead use your card mostly for online shopping, groceries and gas, you’ll want to find a card that allows you to earn on those types of purchases.
Avoiding rewards credit cards with annual fees
Rewards credit cards are available with and without annual fees. It might seem logical to avoid cards with any annual fees, but in doing so you could miss out on some valuable rewards. Credit cards with annual fees often offer some of the most generous rewards programs, so you might miss out by avoiding these cards.
That said, it’s important to do some math to make sure a card with an annual fee makes sense, especially since some fees can cost $500 per year or more. Review your credit card statements for the past 12 months to see where you spend the most, then calculate what you would have earned on those purchases when using the rewards card.
If the rewards are close to or less than the fee, then the card may not be the right fit for you. But if you find that your rewards would be substantially more valuable than the annual fee, then it might make sense to apply for the card.
If you’ve had your card for a while and feel the fee is too high, you can always apply for a different card with a lower fee. Before you do, contact your current credit card provider. The provider may be willing to negotiate a lower annual fee to keep you as a customer.
Missing out on an initial bonus
Many rewards credit cards offer initial bonuses if you spend a certain amount of money within a designated period.
For example, the Chase Sapphire Preferred card offers new cardholders 75,000 bonus points if they spend $5,000 on purchases in the first three months after they’ve opened their account.
These initial bonuses can be lucrative, so as part of your credit-card rewards strategy, avoid missing out on them. Plan out your spending and read all of the fine print to make sure that you’ll qualify for the bonus.
You’ll need to understand which purchases qualify toward the bonus so you can be sure that your usual spending will help you meet the bonus spending requirement on time.
Overspending with your card
The more you spend with your card, the more you’ll maximize your credit card rewards, but overspending will cost you, too. You’ll get the most value out of a rewards credit card if you pay off your balance in full each month, avoiding paying interest on your purchases.
But if you spend so much that you can’t pay that balance down, your interest payments could outweigh the rewards you earn. In the third quarter of 2024, U.S. consumers carried an average of $6,730 in credit card debt, according to Experian.
You could also be paying steep interest on your purchases. The average APR on a new credit card was 24.19% in October, LendingTree reports. Once you begin carrying a balance from month to month, those interest charges can add up quickly, making it harder to pay off your debt in full.
While you’re at it, make sure to avoid any purchases that require a credit card purchasing fee. Credit card purchase fees are often about 3% of the total purchase, and while retailers usually cover those fees, you could be responsible for them in certain instances.
If you pay bills with a credit card, like your utility bills, the vendor may add on a processing fee, sometimes called a convenience fee. Check with the vendor to see if there are any fees associated with credit card payments before deciding to put the charge on your card.
Letting your rewards pile up too long
Watching your credit card rewards accumulate can be satisfying, but don’t leave those rewards to sit for too long. Depending on your credit card, those rewards might expire after a certain amount of time or if your account remains inactive for a certain period.
Your rewards can also lose value over time. For example, if you’re accumulating points, your credit card issuer could change the value of your points whenever they choose, and you could lose out on value. To make the most of your credit card rewards, redeem them frequently to solidify their value.
Sticking with the same rewards credit card too long
Even if you initially chose a rewards credit card that was a good fit for your lifestyle and spending habits, chances are that your lifestyle will change over time. If you’ve had the same rewards credit card for five or 10 years, it may be time for a change.
Review your rewards program and consider whether you’re getting the best value for your spending. If you’ve been making your credit card payments on time, your credit score has probably increased, so you just might qualify for a new card with a better rewards program that will help you earn more on your everyday purchases.
How to make your rewards credit card work harder for you
A well-planned credit card rewards strategy can turn your everyday spending into meaningful perks, such as free flights or extra cash back.
To get the most from your rewards, choose the right card, use it wisely, and review it regularly to make sure it still fits your lifestyle. By avoiding common mistakes like missing bonuses, letting points expire, or keeping a card that no longer works for you, you can ensure your rewards deliver real value.
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