Every time you use a Rewards Credit Card for online and personal purchases, you have the option of earning points, miles, or cashback. Earning these rewards and making the most of your points isn’t hard to master, but implementing strategies can help you maximize your credit card rewards.
In a typical year, cardholders can earn hundreds of dollars in cashback, free flights, free hotel rooms, and other rewards. Here are six tips to help you get the most out of your bonus cards.
1. Use credit, not debit
When you use a reward or cashback credit card, it’s like a built-in discount.
“For consumers with good credit history, leading cash-reward credit cards can return 1.5 to 2 percent on every purchase,” says Patrick Beckman, contributing financial editor at RAVE Reviews.
Beckman advises not to use a debit card, but to use a credit card instead.
“The most obvious cost of using a debit card instead of a credit card is the loss of rewards,” he says. Also, debit cards do not provide the same protection as credit cards.
“With a credit card, reporting fraudulent payments is very easy and you don’t have to pay for them,” Beckman says. “However, since the debit card withdraws money directly from your account, it can be much more difficult to get the money back after it has been spent.”
While you can find fraud protection on both credit and debit cards, debiting a credit card will not immediately drain your bank account like a debit card charge.
2. Take inventory of your spending habits
To maximize rewards, R.J. Weiss, founder of The Ways to Wealth, recommends analyzing your personal spending habits and your budget before even applying for a card to see if the rewards on offer are in line with what you spend the most on.
“Identify the credit cards that provide the highest percentage of cashback for the categories you spend the most on. For example, if most of your credit card spending happens at grocery stores, look for cards that offer a higher cashback rate for grocery store purchases,” says Weiss.
3. Diversify your cards to maximize your rewards
To optimize the reward potential of your credit card, a wise strategy is to have multiple cards with high reward rates in different categories. For example, you can use one credit card for groceries and another for travel expenses.
Beckman strongly recommends using the American Express Blue Cash Preferred® Card for shopping in US supermarkets as it offers an impressive 6 percent cash back. Just be aware that 6 percent ends after you spend $6,000 a year in this category, and then you get 1 percent cash back after that.
If you’re switching cards to get more cash in the evening, you can opt for the Capital One® Savor® Cash Rewards* credit card, which gives you a 4 percent cashback on entertainment and restaurant purchases.
If you pair Blue Cash Preferred with Capital One Savor, you can get the maximum cashback on all meals – at home and in restaurants. Blue Cash Preferred gives you 6% cashback at US supermarkets and Capital One Savor gives you 4% cashback for dinner. If you only used Capital One Savor, you would only receive 3 percent cash at grocery stores, compared to 6 percent on Blue Cash Preferred.
Pairing cards can take your rewards to the next level by optimizing benefits across categories. Most cards have a reward, such as travel or gas.
“The travel card … will give you fantastic benefits when it comes to hotels and airlines, but it won’t reward your day-to-day expenses,” explained Eric Croak of Croak Asset Management.
Choosing separate cards for your main spending categories will increase your rewards and ultimately put more money in your pocket.
“Once you’ve identified the categories you spend the most on—whether it’s groceries, gas, travel, or meals—you’ll need a credit card that awards points in those categories,” Beckman advises.
Choosing the best cards for maximum cashback can greatly increase your rewards over time.
Also, if you want to target travel rewards, you need to diversify the type of points you earn. Here’s How Credit Card Travel Fans Earn Free Vacations.
4. Watch out for bonus caps and limits
Some cards, such as the Chase Freedom Flex℠ credit card and Bank of America® Customized Cash Rewards, limit spending by the amount you can earn points or cash back in a certain category. Cardholders should closely monitor these limits so that they can continue to earn high rewards by using a credit card in their wallet with the best cashback available at the time.
“If you count these cards that run out like Amex Blue Cash Preferred or Chase Freedom [Flex], you may earn fewer rewards than if you had a card with no reward limits,” says Casey Ring, president and founder of Upward Personal Finance. “Count before you apply.”
Weiss recommends a different strategy for keeping track of restrictions and limits—download your credit card provider’s app to track your spending and income.
“Most major card issuers have sections [in their apps] this allows you to track bonus spending over that period,” says Weiss.
5. Keep track of your rewards
Checking your reward progress will help you get the most bang for your buck, according to Kroak. He says that monitoring is also important if you have limits on the rewards you can earn, as you may want to change the card you are using if you hit the maximum annual cashback on a certain card.
In addition, reward tracking also ensures that you use the card’s potential, especially if it has an annual fee.
“If the card has an annual fee, you need to make sure you earn enough to cover the annual fee and more. If your total reward income can’t match the annual fee, you should reevaluate the cards you use,” Beckman says.
You should also check regularly to see if your card rewards have changed. For example, during the COVID-19 pandemic, many credit card issuers changed or expanded their rewards to accommodate changing spending habits as people spent more time at home. Many credit cards have begun offering points for purchases such as takeout and delivery, online grocery orders, and streaming services.
6. Always pay bills in full and on time
If you do not pay off your entire balance on time and in full, you will incur high interest rates that reduce or completely nullify your rewards.
“Credit cards are known for very high interest rates—between 15 and 30 percent,” Beckman says. “If you roll over your card balance from month to month, the interest you pay will negate any value you get from the rewards. You will earn between 2 and 7 percent in remuneration, but once you keep the balance and accrue interest, you will lose most, if not all, value.”
The most important caveat to maximizing your credit card rewards is to pay off your balance in full each month.
“No credit card reward will ever be worth more than the value of high-interest debt,” warns Weiss.
bottom line
Rewards credit cards give you cash back and other benefits just for making your regular purchase. The starting point for earning rewards is to use a credit card instead of a debit card. You earn every time you use your credit card and you also get purchase protection.
Choose bonus cards depending on where you spend the most; You can earn miles with co-branded cards for travel, cash back or points with rewards for certain categories, such as meals or shopping.
Finally, when maximizing rewards, it’s important to only use your card when you can pay your balance in full. Otherwise, you will spend enough interest to negate what you have earned.
*All Capital One Savor Cash Rewards credit card information has been independently collected by CreditCards.com and has not been verified by the issuer.
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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.
