Pointers for Using Credit Card Points

Written by
David Mully
Read Time: 5 minutes

(Updated February 2015)

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. For one thing, opening too many credit cards can have a negative impact on your credit score.

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.

The best strategy is to focus on one or two cards so you can pile up points fairly quickly and use them before they expire. Also, it's easy to lose track of how many points you have if you're using multiple cards.

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, and provide you with greater flexibility as well.

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. Some large purchases may come with additional points if you use a certain card. Rewards programs are tiered for the big buys, so select travel or auto purchases.

In addition, you may find that your card will provide extra points for certain types of purchases or for purchases from certain companies. This may vary from season to season and are often repeated from year to year, so keep an eye on your cards to see what's currently being offered. You also want to choose cards that offer extra rewards from businesses you already patronize, so as to get the maximum benefit.

Point five. Choose your rewards.

What sort of rewards do you want to earn? Frequent flier miles are probably the biggest one, but you can also cash in points for things like dining out, hotels, gift cards, discounts or even cash. 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.

When choosing a reward, you want to be sure it's one you'll be able to utilize. For example, one card may offer bountiful frequent flyer miles, but on an airline that offers only limited flights out of your nearest airport or to the destinations you'd like to visit. Check too, into the restrictions on using those points. Some frequent flyer programs can make it difficult to travel where and when you want to.

Point six. Think carefully about fees.

The cards that offer the best rewards usually come with a price. Specifically, an annual fee. These days, you shouldn't have to pay a fee for any credit card, particularly if you've got decent credit. And zero-fee cards can offer some very attractive perks as well.

However, if you're interested in piling up points for a certain type of reward, such as frequent flier miles for regular trips year after year, it might be worth your while to consider an enhanced-rewards card that comes with a fee. The key is whether the fee you'll be paying is significantly less than the value of the reward you'll be receiving each year.

Another thing to be wary of is minimum use requirements. Some cards will offer you tons of points, particularly as a reward for signing up, but only if you charge a certain minimum amount each year. If you don't make that many purchases, rewards like that won't help you.

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.

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