Credit card points are a great way to take a trip or get a little cash back on a large purchase, but to truly maximize your credit card points takes planning and research.
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Check out these tips to help you enhance your points while being mindful of your spending.
Pick the right card.
Choosing the right card is the first step in ensuring that you get the best deal.
Conduct research.
Use a card comparison website to review various cards side by side and find the rewards that fit your needs. Be mindful of the annual percentage rate on the card, any annual fees and your credit score so you can make an informed decision.
Points are generally worth about a 1 cent per point (a little more or a little less, depending on the card program). Although that can add up over time, you still need to be aware of what your points are worth. Don’t fall into the trap of thinking that money back in rewards is worth more than the balance you may carry on the card.
Consider the sign-up bonus.
Credit card companies offer a large lump sum of points after you spend a certain amount in a specified time frame. This sign-up bonus is meant to entice you to use their product. For example, a card issuer may offer 30,000 bonus points when you spend a certain amount—usually $1,000 or more—within the first few months of opening the card.
Some cards will offer bonus categories, such as double points on groceries or gas, and may even have revolving categories that change monthly or quarterly. Be on the lookout for cards that have categories where you already make purchases (gas, restaurants, home improvement, etc.), so you aren’t spending more than you normally would to meet the minimums.
Opt for flexibility.
Points systems generally offer greater flexibility than airline miles, but you can often convert both into flight upgrades, hotel rooms or even use them to purchase products from retailers.
Maximize by looking at travel partners.
Points systems allow users to transfer their rewards into airline miles or hotel stays equal to or sometimes more than their original value. American Express points transfer at a 1:1 ratio with most of their partners, but are actually worth 2:1 if you transfer them to the Hilton loyalty program. If you travel often or internationally, look at which airlines and hotels partner with the credit card, and how their points transfer to flights, hotels or other benefits.
Consider the other card benefits.
Card companies like Chase also allow you to purchase items directly with points through its rewards mall websites and include retailers like Amazon, Macy’s and Sephora. Many people allow their points to accumulate over the year and use them to supplement birthday or holiday shopping.
You can also choose to get cash back by trading your points in for a statement credit or even a deposit into your savings or checking account.
Remember, the house always wins.
Using credit card rewards can be an effective strategy to get a great deal on travel, but it’s important to remember that the credit card companies are ultimately there to make money.
Pay off your balance.
According to consumer credit bureau Experian, the average credit card balance in 2020 was $5,315, which means most of us have work to do on getting our cards paid off. Credit card companies make money from the interest charges, so they go to a lot of trouble to normalize carrying a balance month to month and distract consumers with enticing point offers.
Avoid the trap of something for nothing.
It’s important to remember that although you are getting cash back on purchases, you are still charging money on a credit card. Any rewards are worth far less than an interest charge would be on a high balance, high interest card. Carrying a credit card balance for a long time or having a high debt-to-income ratio can affect your credit score, which can have implications on your future financial plans. Don’t rationalize carrying a balance on your card just to get the rewards—the system is set up to get you to spend more.
Credit card rewards can be a great way to get a little money back on your everyday purchases, but it’s important to manage your credit cards and not let them manage you. With some research and insight into how you specifically use your credit cards, you can make the most of these earned points.
