Reward programs haven’t always been so easy to come by. Sign-up bonuses and other perks were once reserved for people with long, outstanding credit histories. But times have changed, and in some cases, having just a moderate credit score is good enough to be approved for a credit card with generous rewards. With so many reward choices and the average American carrying three different credit cards at any one time, it’s easy to see how rewards may go unredeemed. But forgetting about those unused reward points is a huge mistake!
Approximately $48 billion in credit card reward points are awarded each year, with one-third going unclaimed for a staggering loss of $16 billion to cardholders. If you’re one of the millions of people who let their credit card rewards lapse or go unredeemed, you’re essentially giving the credit card companies more than $200 of your own hard earned money.
Choosing the Right Reward Program
Reward cards can be extremely lucrative when you choose the right program and maximize all the benefits. Choose the wrong program and it could be difficult or impossible to truly take advantage. For many people, using a cash back credit card is the easiest way to earn credit card rewards. Cash is more straightforward and easier to redeem than points or miles, although some programs can be a bit complex with rotating categories that provide varying levels of rebates.
Miles and reward points are often more difficult to redeem than cash, but you have the potential to unlock even greater value if you’re willing to abide by the terms and follow a more strict spending and redemption routine. These types of cards are especially useful for travelers since excellent bonus opportunities come from travel related expenses, such as: airline tickets, hotel stays, rental cars and more. The perks can then be reapplied to future travel needs.
Know Your Redemption Options & Maximize Your Rewards
If the details of your reward program seem daunting, the customer service department should be able to assist you with understanding the program details. If your rewards have been sitting dormant for more than five years, you may have lost some to attrition. Another possibility is that the program has changed and some of your rewards have been lost or reduced in value, but that doesn’t mean you shouldn’t attempt to recoup what’s owed to you. Make sure you read the terms, ask questions and consider the following tips to protect your rewards and prevent them from going to waste.
- Understand the Program: Learn everything you can about your reward program and how you can earn the maximum the rewards. Generally the most attractive features will be promptly displayed to lure new customers, but the finer points, like what the rewards are actually worth, will be less obvious at first glance. Carefully read the terms, conditions, exclusions and limitations that may apply. This information is integral not only to frequent redemption, but also to redeeming points/miles for the maximum value.
- Redeem Rewards Frequently: Avoid losing track of your rewards by redeeming them as frequently as possible. For cash back, this may be as soon as you’ve accumulated a $25 rebate check or account credit. If you’re working towards a pricey reward like airline tickets or other travel expenses, be sure to conscientiously oversee your account and redeem your miles as soon as possible once you’ve reached your goal.
- Use Different Cards: The so-called ‘island approach’, a strategy that is gaining momentum with many consumers, entails using different credit cards for different transactions to earn bigger rewards. By using a gas card, a travel card and a premium cash back card for each of these types of purchases, you’ll see your rewards increase.
- Avoid Carrying a Balance: The real value of reward credit cards comes into play when the balance is paid in full each month. Incurring interest for just a few months could wipe out any benefit you may have gotten from earning the rewards.
- Ignore Catchy Gimmicks: Don’t apply for a credit card simply because it offers a sign-up bonus or is associated with your favorite retail store, sports team or celebrity. These rewards cards typically have lower redemption values, so read the terms carefully and verify that it’s actually worth incorporating into your credit card routine.
In a fiercely competitive credit card market, there’s a perfect reward card for just about everyone. A disciplined approach will ensure that you reap the most rewards, but keep in mind that reward cards can be extremely costly when carrying a balance. If you can’t payoff new purchases quickly, interest charges are sure to offset any perks you may have earned with your card. The best approach to tackling every purchase is to carry a low APR credit card for longer-term charges, and a reward card for daily items that can be paid off in full each month.