How to Get the Most Value out of Your Rewards Credit Card

With promises of a free flight, a free meal, a free vacation, free tank of gas, or even cold hard cash, reward credit cards offer perks and rewards that will appeal to just about everybody.

No matter how big or small your wish, there’s a good chance there’s a credit card out there promising to deliver it to you in a rewards program.

Are these cards good deals? They can be. But you’ll need to study each offer very carefully.  You’ll also need to make a realistic assessment of your credit card spending habits.

If you only spend a couple of hundred of dollars a month on a credit card, it’s going to take you a long, long time to be rewarded much of anything. On the other hand, big spenders, people who routinely spend a couple of thousand dollars per month on credit cards, could benefit from a reward card program.

Here are some important questions to ask before signing up for a reward card.

How good is the reward?  Popular rewards cards include airline mile cards, cash back cards and cards that promise a wide array of merchandise and experiences. Is your goal a free airline trip to anywhere in the country? A roundtrip ticket to Paris? Are you just looking to earn a little cash in return for your credit card spending? Or maybe a free tank of gas? Or a free cup of coffee at Starbucks? Do you like the idea of earning reward dollars for a favorite charity? 

How long will it take you to earn the reward?  Now take a look at how long it will take you to earn rebate points or miles. With cash back cards, you’ll often earn rebate points based on a percentage of your monthly spending, often 1 percent to 5 percent.

With airline mile cards associated with a specific airline, you often earn one air mile for every dollar you spend with the card and 2 air miles for every dollar you spend on airfares on that airline. These cards often come with annual fees of $50 or more. Free flights in the U.S. are available when you attain 25,000 or 30,000 air miles. For a free trip to Europe, you’d need to accumulate 40,000 miles or more.

Other travel cards promise free trips on any airline and no blackout dates. Many of these cards have no annual fees but you it may take you a bit longer to accumulate miles. Some travel cards limit you to earning just one air mile for every dollar you spend with the card.

Other reward cards allow you to cash in more modest rewards after earning just a few thousand points or miles. Weigh your options carefully. 

Is there a minimum spending limit? Are you required to spend a certain dollar amount per month or per year to keep your rewards active?  If so, how much?  Are you comfortable spending this much money on a credit card in the hope of one day earning a reward?

Is there a spending cap per month or per year?  What’s the maximum number of rewards points or miles that you can earn in a year? This question is especially important for big credit card spenders. A low yearly spending cap could really slow down your accumulation of rewards points. If you’re likely to meet the spending cap mid-way through the year, that particular reward card probably isn’t right for you. Big spenders should opt for cards that let them spend big.

When do your rewards points or miles expire?  Will your rewards points expire after six months? A year? Five years? Some cards offer reward points with no expiration dates.  Will you be able to earn enough points to earn a reward before your points or miles expire?   If you’re not a big spender, you may want to opt for a card with modest reward goals and a five year or longer expiration date on the rewards you accumulate.

How easy is it to cash in your rewards?  What’s the process for cashing in your rewards?   Some cash back cards will automatically add cash to your card account once you meet a rewards goal. Others will allow your cash rewards to accumulate to higher amounts. What steps will you need to take to cash in a free roundtrip airline ticket? Are there blackout dates? How soon can you schedule a free trip with an airline? 

Does the card come with an annual fee?  Some reward cards come with annual fees of $50 or higher. Others come with no annual fee. Is the annual fee worth the opportunity to earn rewards, such as air miles with your favorite airline?

What’s the annual percentage rate?  What kind of interest rate will you pay with the card if you should carry a balance from month to month?  Unexpected expenses happen. And charging up a reward card and getting stuck with some hefty finance charges will eat away at any rewards you may be earning with the card.

Is there a teaser or introductory rate?  If so, how long does it last?  Using a reward card to finance a larger purchase may be a good idea, as long as you’re able to pay the balance in full by the time the teaser rate expires.  Whatever purchases you put on the card during the introductory period, be sure to pay off before the standard APR kicks in.  Finance charges will offset any rewards you may be earning, especially if your balances linger for months on end.

What penalty fees are associated with the card?  Nobody expects to pay late, but late payments do happen and late fees and penalty interest rates can be awfully steep. Just how rewarding will that card seem when you’re paying a $39 late fee and a penalty interest rate of more than 24 percent kicks in?  Be mindful of the penalties on a rewards card before you sign up for a card. Do everything you can to pay your account on-time every single month. If a due date is looming, pay online or by phone. You also might want to consider setting up automatic payments for a reward card. That way you’ll never run the risk of being hit with a late fee or penalty.

You can browse Credit.com’s selection of rewards cards to find the offer that is best for you!