Pointers for Using Credit Card Points

The smart credit card holder gets all the rewards. These bonuses yield some tremendous benefits, provided that you use your points correctly. Here's how to get the most out of them.

If there was ever an indication that the credit card business is hyper-competitive, it would be the number of reward programs on the market. Roughly 50 percent of credit cards feature some type of rewards program, including cash-back bonuses, free airline tickets, and a host of retail items.

When you pay your entire balance on a monthly basis, the rewards program is a no-brainer. However, getting the most out of it requires making the best use of your points. Here are some simple tips to make a few rewards go a long way:

Point one. Don't spread yourself thin

There are quite a few reward programs on the market, and many of them look appealing. The strategy of acquiring multiple cards isn't a good one, however. Opening too many credit cards can have a negative impact on your credit score. But more importantly, you can't redeem a reward unless you've built up a large number of points. If you hold too many accounts, you'll spread yourself thin, and never accumulate enough points to cash in any rewards.

Point two. Look for preferred partnerships

Many companies form alliances to make their rewards programs more enticing. An airline, a car rental agency, and a hotel chain, for example, may honor each other's rewards points. These partnerships tend to give you more bang for your reward buck.

Point three. Patience is a virtue, but don't miss the expiration date

Just like in comedy, timing is everything when redeeming your rewards points. Each program has its own deadline for redeeming them. Keep a watchful eye on those dates: If you miss an expiration date, you could lose all your points. You may not have to make a large purchase to redeem those points; often, a smaller purchase is all that's required to hold onto them.

Point four. Bigger purchases are rewarded

While small purchases can help you extend an expiration date, you'll generally get the biggest benefit with larger ones. Rewards programs are tiered for the big buys, so select travel or auto purchases. Make a list of different items you'd like for a reward, and then check how the program points compare to real world dollars. Target a card that delivers the most bang for the buck.

If you decide to pursue a rewards program, remember the motivation for the credit card companies. They don't like giving away freebies out of the goodness of their hearts. These corporations hope that they can recoup their costs on finance and interest charges down the line, which is why there are so many rules for each program. Take the time to understand the rules, and you can win big at the rewards game.