Some people who own a rewards credit card may fall in the trap of bad debt in an attempt to earn more rewards. If you are reward credit cardholder, are you guilty of this habit? Do you tend to spend more with your rewards credit card just because you want to rack up those points?
The truth is, you need to be smart about how you spend with your reward credit card. Credit cards with rewards generally have higher interest rates than non-reward cards. If you keep charging expenses to your card and fail to pay on time, you could be spending more on interest rate fees than what your credit card gives you back.
How can you increase your credit card reward points without getting into bad debt? Consider the following tips:
Use your reward credit card to pay recurring bills. You can use your reward credit card to pay for monthly bills that you’ll have to pay in cash anyway. Yes, charging utility bills to your rewards card is a great way to rack up points without necessarily spending. Just remember that if you’re going to do this strategy, you should pay off your charges with cash immediately to avoid the interest rate fees.
Understand the reward program. In order to maximize your earnings, you should know how the reward system works. For example, is your reward credit card affiliated with specific merchants? Most credit cards with rewards promote their affiliate shops by offering bigger rewards on purchases made from participating sellers.
What other ways can you earn reward points? Some reward credit cards may give you extra points if you use your credit card to reload your cell phone or if you pay your credit card bills online. Review the Terms and Conditions of your rewards credit card so you can plan your strategy for collecting points more effectively.
Redeem points on time. Some reward credit cards impose blackout dates and expiration period which means you can lose those hard-earned points if you do not redeem them on time. See to it that you are aware of your credit card’s policy regarding rewards redemption. Better yet, you should choose a reward credit card with no blackout dates or point expirations. You can find credit cards that will allow you to carry over your unused points for next period as long as you keep your account active.
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Plan your purchases. Sure, you can spend with your reward credit card but you need to make sure that you can afford to pay your charges in full and on time. Do not use your rewards cards on unplanned purchases with the excuse that you can collect more points anyway. Impulsive buying must be avoided by consumers, particularly reward credit cardholders.
Do not pay interest rate. Trying to rack up reward points would be senseless if you keep paying the monthly rate. Don’t let Apr charges offset the value of rewards you enjoy. If you need to carry a balance in your account from time to time, you may use a non-rewards credit card with a low rate specifically for this purpose.