How to Be Smart with Rewards Cards
Opening a credit card with rewards is a smart way to make your money work for you. Your rewards points can be used to boost your finances—if you use them responsibly. But, there are so many to choose from! Maybe you're not sure how to go about making the right choices.
Rewards credit cards are a simple concept: For every dollar you spend, you get something in return. It might be discounts at your favorite store, airline tickets or even cash back.
Ultimately, the question isn't if you should get a rewards-based credit card, it's which card is best for you? Here's a list of dos and don'ts to help you decide:
DO choose the right card for you
Before you apply for multiple credit cards and inadvertently damage your credit score, hunker down and do a little research. What kind of rewards are you looking for? If you love to travel, consider a card that offers air miles or hotel discounts. If you want a little bit more money, look for a card that offers good cash-back deals. If you want a little bit of everything, find a credit card that offers Visa® Rewards points, which can be redeemed for travel rebates, gift cards, event tickets, cash back and more.
Then, think about how much you’re comfortable spending to earn those rewards. If you want to keep your balance low and manageable, look for a card with a lower credit limit. If you’re confident you can handle paying off a higher monthly balance, find one that lets you spend more. Be sure to shop around for a good interest rate!
DON’T overspend to earn rewards
Speaking of interest, don’t use your rewards card to spend money you don't have. A rewards card is not worth much if it costs you more than you earn.
DO organize your spending
Once you choose a rewards card and determine how it works with your budget, take a look at the type of expenses you can pay with your card. A prudent strategy is to use your rewards card for regular, recurring expenses. The occasional shopping spree won't necessarily boost your points total—but your monthly subscription services and biweekly gas fill-ups, on the other hand, could eventually translate into a future vacation or cash deposit. Again, these are expenses you’ve already budgeted for and plan to pay off before the end of your credit cycle.
DON’T let your rewards expire
Once you've earned those precious rewards, don't let them go to waste. Read the fine print that comes with your card to determine how long you have to cash in, then set up reminders to make sure you use the rewards before they expire.
DO take advantage of incentives
Often, rewards cards will offer a signing bonus for new cardholders—like waived interest fees, a large amount of points or low interest rates during an introductory period. Many have special promotions throughout the year like double or triple rewards points or extra points for certain purchases. Pay attention to these offers and promotions and plan your spending to get the biggest benefit.
Rewards cards are a great way to transform your regular spending into a more rewarding experience. By using responsible spending (and payment) habits and reading the fine print carefully, you can turn your money into a dream vacation, event tickets and more.
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