How to Use Your Rewards Credit Card

Credit cards with rewards have been introduced in the market to encourage loyalty among cardholders.  If you earn rewards each time you swipe your card, wouldn’t you be inclined to use your credit card more often?

Indeed, reward credit cards offer consumers the opportunity to get more from their spending.  However, how you benefit from a reward credit card largely depends on how well you manage your account.  On this post, we discuss some useful tips on how you can use your credit card with rewards to your benefit:

Pay in full monthly.   Don’t forget that reward credit cards typically carry higher APR than their non-reward counterparts.  Thus, monthly charges should be paid in full as this is the only way you can avoid interest rate fees.  Do you have any doubts as to whether you can pay off your bill in full by the month’s end?  If yes, better use your cash than charge it to your reward.

Seize the chance to earn more.  Most reward credit cards offer 1% rebate for every dollar spent but sometimes you can earn “up to” 5% per dollar on certain types of transactions.  When you see the phrase “up to”, keep in mind that you can only earn the maximum number of points on ‘qualifying purchases’.   For instance, you can earn 5% if you used the card to purchase from an affiliate shop or from selected categories.  Take advantage of the opportunity to earn more rewards by understanding the rules of the reward program.

Watch out for credit cards with high annual fees.  See to it that the value of rewards you earn each year far exceeds the annual costs.  If you have to pay anywhere from $50 to $100 a year to keep your credit card active, is the card still worth keeping?   Better yet, look for a reward credit card with a reasonable interest rate and does not carry an annual fee at all.

Know your limits.  All issuers of reward credit cards impose limits and restrictions.  For example, there might be a cap on the value of rewards you can earn in a month or a year.  Once you reach the maximum number of points, you will stop earning points even if you keep spending with your credit card.

What about the rules in redeeming rewards?  If you own an airline miles reward credit card, can you exchange your points for other types of rewards in case you cannot go on a travel?  The best type of travel reward credit card should offer flexible redemption options.

Some issuers of reward credit cards penalize cardholders by forfeiting their points.  If you miss your due date of payment, you may lose all the points you collected within that billing period.  Sometimes, the points will expire if you fail to exchange them within a specified period.  Clearly, it’s very important to be aware of your reward credit card issuer’s terms and conditions, particularly when it comes to your limitations as card holder.

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