With so many different offers to choose from, consumers often look for credit cards with the lowest interest rates and the biggest reward perks. But choosing a great reward card is only the first step to benefiting from it. Clouded by the hope of accumulating enough reward points for a dream vacation or a big cash bonus, many people overlook the details found in the small print of every credit card agreement. Credit card companies gain enough of your hard earned money through interest rates and fees, so it seems unconscionable that they would penalize your benefits or deny a reward claim. Before you assume you’ve got the upper hand on the credit card company, be aware of these common mistakes that can decimate your credit card rewards.
If you’re going to play the credit card game, take the time to understand the rules; especially if you’re going to use reward cards. Don’t pay more to the credit card company than you can earn by using a reward program and avoid making the following mistakes which inadvertently benefit the issuer.
#1 – Letting Your Credit Card Rewards Expire
The most common way to lose your reward points or miles is by letting them expire. While it’s true that many issuers offer no-expiration policies to their cardholders, there are still some that have cutoff dates for redemption. If you close the account or allow the company to close it for lack of use, you may be signing away your right to redeem your rewards.
#2 – Carrying a Balance or Paying Just The Minimum
Credit cards that offer the best reward incentives often have higher interest rates than those that don’t, so carrying any amount from month-to-month will limit (or destroy) the benefits you gain. To earn the most from a reward credit card, payoff the balance in full each month. If that’s not possible, reserve the card for purchases that can be paid off within just a few short months. Check out the disclosure box on your credit card statement to see the high cost of carrying a balance. If you can’t pay off a new purchase quickly, consider a lower rate credit card – or wait.
#3 – Paying Your Bill Late
Make a late payment once and you’ll be charged a fee of up to $39 – the company may even notify you that they’re raising your interest rate. Make two payments more than 30 days late or miss one entirely and it’s a sure thing that you’ll see the interest rate shoot up, effectively destroying any possibility of benefiting from a rewards program. On top of that, some credit card companies will eliminate any accumulated rewards for late or missed payments.
#4 – Ignoring Your Mail Box
Don’t make the mistake of shredding bulk mail from your credit card company assuming that it’s a solicitation for another credit card offer or those pesky convenience checks. Rate increases and other changes to the terms of your credit card will come via snail mail and can have a serious impact on how you should handle using a reward credit card. For example, an interest rate hike will be sent 45 days in advance of enactment. If you open and read your mail, you’ll have enough time to move the balance to a lower rate card, pay it down or stop adding to it.
#5 – Dismissing The Bill
Never assume that the charges on your account are accurate – mistakes happen and crooks are on the prowl. You have a limited amount of time to report unauthorized purchases on your credit card. An important way to recognize fraudulent activity is by reviewing all the charges each month to make sure they were made by you – not a thief. If you fail to catch unauthorized purchases made by a crook, it’s likely to wipe out any benefit provided by your rewards, and then some.
#6 – Cash Advances, Balance Transfers & Overdraft Protection
The fees and interest you will pay to borrow from the account or make a transfer will quickly offset any rewards you may be hoping to gain. It also adds to the balance, making pay off that much more difficult. Cash advances are a BIG NO-NO, and if you’re going to transfer a balance, look for an offer with zero interest (for 12 months or more) and no balance transfer fees.
Never Charge Just to Earn Rewards!
Earning rewards for every purchase is an enticement to charge more. A small monthly payment may be a stumbling block to uncontrolled debt unless you have a budget that includes a strict maximum credit limit that you vow not to exceed. Many people see a small payment as an opportunity to buy more believing that the small payments will be manageable. It’s slippery slope that may lead to large balances that can take years to pay off. In the meantime, those lines of credit would have been available for emergencies and essentials if you had limited their use. Plus, those high interest rates are sure to decimate all the rewards you “thought” you were earning by using your card.