More than half of American adults (59 percent) have at least one cashback credit card, according to a 2021 Bankrate.com survey.
But the same study shows that we are not always making the most of card rewards: in 2020, 33% of cardholders did not receive any rewards.
Here are 10 common refund mistakes to avoid, as well as some tips on how to squeeze every dollar out of those rewards.
1. You can’t find the card that best suits your lifestyle.
“There are so many flavors and options for cashback cards,” says Mark Bellanger, director of customer marketing for Visa. And depending on your lifestyle and what you spend money on, there may be a card that allows you to earn more, he added.
Secret: Count how much you spend in different categories like travel, food, groceries, etc., says Julie Pukas, Head of Bank Cards and Merchant Solutions in the US for TD Bank. Her advice: “Really understand what you’re looking for and what you’re spending your money on.”
And if you want to use your card everywhere but don’t want to waste time figuring out which card to use for every purchase, a flat rate cashback card might be the way to go.
Another factor in your equation: annual fees.
“Using a no-fee card is a win-win,” says Zach Honig, Editor-in-Chief of The Points Guy. And some of the best cashback cards have no annual fees.
2. You delay rewards too long or don’t use them strategically.
There are definitely consumers who forget to exchange cash — although this is often easier than redeeming points or miles, says Bellanger.
“Frequent atonement is probably a good idea.”
The only exception to the rule is when you accumulate rewards in order to cash them out on another card (with a higher rate).
For example, if you have a Chase Freedom Flex℠ or Chase Freedom Unlimited card, you accumulate 1 to 5 percent cashback.
But if you accumulate these rewards and redeem them for travel through Chase Ultimate Rewards with one of the Chase Sapphire cards, you can receive an additional bonus of 25 to 50 percent of your points.
So if you plan to travel frequently, exchanging your money for points can help you earn big rewards.
Expert Tip: Take advantage of the fact that some cards allow you to exchange your cash rewards back for points or miles on cards from another issuer.
3. You are neglecting to register for these categories of quarterly bonuses.
While some cards offer additional bonuses in certain categories all year round, others increase your cashback in rotating categories that change quarterly if you sign up for them online every quarter.
In some cases, such as some Chase or Discover cards, this can five times your cash rewards.
“If you don’t activate those quarterly bonuses, it’s a mistake,” says Honig. It’s also a good time to flag new spending categories so you use the card that gives you the most value for your purchases.
Expert Tip: Add a reminder to your calendar to subscribe to changing categories every quarter.
4. You do not use discount coupons and shopping portals to increase cashback.
Another mistake too many consumers make is not using coupon apps (like Ibotta), coupon codes and shopping portals (like Rakuten and Upromise) to add up extra savings on top of cashback, says Brian Preston, CFP, Managing Director Wealth galore and host of The Money Guy Show podcast.
If you can accumulate cashback bonuses, portal discounts, and coupon codes, “it’s a triple whammy,” says Preston.
“As a consumer, my advice is: don’t be surprised by this. [sign-up] bonus amount. Make sure the underlying cost will be profitable for you in the long run,” he added.
Expert Tip: Pay attention and use coupon apps, coupon codes and shopping portals to add to your cashback rewards.
5. You are dazzled by signup bonuses
“Most cashback cards have some sort of upfront bonus,” says Bellanger.
On average, these signup bonuses, which require you to spend minimal money, typically within the first three months of opening an account, are around $150.
These bonuses are a nice plus. But if you plan on using the card regularly for a few years, focus on the return rate you get for things you want to buy instead, says Bellanger.
This way, even long after you’ve used this bonus, you’ll still have a card that rewards you generously when you use it.
“As a consumer, my advice is don’t be surprised by this bonus amount,” says Bellanger. Instead, “make sure the underlying cost will be profitable for you in the long run.”
Expert Tip: Signup bonuses are great, but make sure they don’t distract you – instead, choose a card that will reward you in the long run for everyday purchases.
6. You ignore spending limits
Some cards have limits on cashback spending. After you reach the limit, you can still get cashback but at a lower rate (usually the minimum the card pays).
This means you are missing out on the chance to get the maximum reward for the money you are already spending.
Instead, aim for a cash-back card that covers what you’re already spending (in total or in categories like gas, groceries, and dining out), with a small margin. Or consider using multiple cards to maximize your cash rewards.
For example, Citi’s Costco Anywhere Visa® Card offers a 4 percent refund on up to $7,000 on eligible gas purchases (then 1 percent) each year. Even at $6 a gallon, that’s about 22.5 gallons a week.
Expert Tip: Consider using multiple cards to maximize your cashback rewards, or again, get a card that covers you in the categories you’re already spending.
7. You carelessly use cards for “auto-pay”
Using a cashback card to pay your bills is a great way to reach your spending threshold and earn cash rewards.
“It’s basically a 2 percent discount coupon,” says Preston.
But that doesn’t mean you have to pay your bills on autopilot, Honig says. Often spotting small mistaken bill payments, Honig realized it “makes sense to check everything” – and use cards to pay electronically without setting invoices for automatic payments.
Also, if the bill is larger than expected (and too much for your line of credit), this auto-pay can maximize your card. Or even denied payment. Any resulting penalties may also cancel out any hard-earned cashback on your card.
Expert Tip: If you still choose autopay, review your reports regularly. This will help you spot billing errors as soon as they happen.
8. You don’t avoid foreign transaction fees
While many high-end bonus cards have eliminated foreign transaction fees, some cashback cards still do, Honig said.
Foreign transaction fees typically add 3 percent to your purchases made overseas, and you don’t need to be a VIP to enjoy them. “If you’re shopping [from websites or companies] outside the US, that’s something to watch out for,” he said.
If you receive 2 percent [cash] by returning the money but paying interest, you negate any potential benefit from the cashback card,” Honig added.
Expert Tip: If you plan to use a cashback card when traveling outside the US or on foreign websites, consider signing up for a card that does not charge foreign transaction fees.
9. You keep balance
“If you get 2 percent [cash] by returning the money but paying interest, you negate any potential benefit from a cashback card,” says Honig.
According to the American Bankers Association, about 40 percent of Americans do not pay their card bills in full every month. This is a losing game.
The average annual interest rate for cashback cards is around 1.3% per month, so if your cashback card brings in 1%, you are losing money. And if you get 2 percent, you’re barely paying off. If you want to get all the juice out of your cashback card, only spend what you can afford to pay each month. And if you want a card that you can spin from time to time, buy one of the best zero interest credit cards.
If you run into a balance that you can’t pay off, take the cashback card out of circulation and consider using these rewards for your current balance.
Expert Tip: If you want to get everything you can from your cashback card, pay the balance in full each month. Thus, the interest you will have to pay if you have a balance will not negate your rewards.
10. You stick to the same old, same old
In the credit card industry, new customers benefit from generous signup bonuses, promotional rates, and generous perks. While changing cards can be painful, it is often the only way to bargain. It’s also a good way to choose the cards that will offer you the most when your spending habits change.
And changing your card won’t cause you to lose your credit if you do it right. If you want to change your cashback card (and close one), make sure you cash out all your rewards before closing your account.
Expert Tip: If you change cards, do not leave rewards on the one you close.
Editorial disclaimer
The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.
