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Credit cards offer a variety of cashback rewards plans, including direct cash back on your purchases, welcome bonuses, reimbursements for different expenses, and more.
Knowing your spending habits and the in and out of your credit card offering is key to maximizing your cashback.
Make sure to increase your cashback rewards on your planned purchases – and not be tempted to buy more.
Among the many rewards schemes by card companies, a cashback rewards program appears to be the most beneficial for most consumers and one of the simplest. But it wouldn’t hurt to know the guidelines that can help you get the most from a cash-back program.
On top of this is the caution to spend only up to what you can afford to pay off in full each month. If you don’t pay your total card bill, you will be revolving the funds and have to pay interest or finance charges. These charges would most likely eat up any reward you’ll get. If you can’t help but carry a balance, get a low-interest card instead.
1. Choose The Right Rewards Credit Card
The chart below shows the frequency in which United States consumers compared credit card rewards against the competitors in the market. According to US News, 52.2% of the participants said they compare their credit cards less than once every 3-years. And 16.5% of the respondents do it once a year. Only 6.2% said they do it once every two years.
Check if your chosen credit card and rewards program fits your financial lifestyle. If you’re a frequent flyer, a hotel credit card or airline card may be the best for you. A gas rewards credit card might be optimal if you’re always on the road.
If you want simplicity, you may prefer a cash-back credit card.
Many cash-back cards offer several ways to redeem rewards, such as checks, statement credits, gift cards, or donations to your chosen charity. Others will automatically credit your bank account for your rewards.
Remember that not all cards are equal, even if they offer a similar type of rewards program. For example, some will have higher divisors to compute your credits, and others might have minimum spending limits to qualify, so familiarize yourself with the terms and conditions first.
2. Watch Out For Bonus Opportunities
Card companies often offer promotions and opportunities to double or even triple your rewards earnings, so watch out for them.
Many would offer increased cash-back return rates every quarter to boost sales of certain product categories.
An example would be when issuers would increase the rate to 5% on gas purchases during summer when families use their cars and campers to drive to vacation places. Other companies will increase rewards during the winter holidays.
Some card issuers will ask you to enroll in their quarterly or seasonal cash-back specials, so be waiting. Check your mailbox or inbox because they mail the materials or send them online or through your mobile phone.
Another convenient way to get more rewards is by shopping through the issuer’s online shopping portals. For example, Discover offers cash back to cardholders who shop through the Discover Deals portal, which features retailers such as Bloomingdale’s, Walmart, and Apple. Other issuers have similar schemes and bonuses.
3. Have One or Two Back Up Specialty Cards to Cover Special Categories
Some cards give you special bonus points when you use your card at certain places, such as supermarkets, gas stations, or department stores.
Analyze your regular spending in these categories to check which cards will give the highest rewards to you.
For instance, if a card offers 3% cash back at supermarket purchases, compute your annual grocery spend and get 3% of that to know your potential cash back every year. Use that baseline figure to compare the card to other cards that offer fixed bonuses in other categories.
Or, you may want to get a card that can give you 5% back in categories that change every quarter. Of course, you have to keep up with those categories, but it may be worthwhile. Just remember that usually, with these card types, your spending in non-bonus categories will usually earn you only 1% cash back.
To maximize the rewards that you will earn, use your specialty card when making purchases in bonus categories and use your ordinary card for all other credit card expenses.
1-5% 5% cashback on up to $1,500 in rotating category purchases each quarter when you activate the bonus category (then 1%), as well 1% percent cash back on all other purchases
Match Bonus unlimited dollar-for-dollar match of all the cash back you've earned at the end of your first year, automatically
1-6% 6% cash back at U.S. supermarkets (up to $6,000 per year in purchases, then 1%) and selected U.S. streaming subscriptions, 3% cash back on transit and U.S. gas stations, 1% cash back on other purchases
$250 $250 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months
1% – 4% unlimited 4% cash back on dining, entertainment, and popular streaming services, 3% at grocery stores and 1% on all other purchases.
$300 $300 cash bonus once you spend $3,000 on purchases within 3 months from account opening
1-5% 5% cash back on up to $1,500 in combined purchases on selected categories each quarter and 5% cash back on travel purchased through Chase Ultimate Rewards®. Also, you can earn 3% cash back on dining at restaurants (including takeout and eligible delivery services), drugstore purchases , and 1% on all other purchases
$200 $200 bonus after you spend $500 on purchases in the first 3 months from account opening
2X – 5X 5x total points on travel purchased through Chase Ultimate Rewards, 3x points on dining and online grocery purchases and 2x on other travel purchases. Plus, earn 1 point per dollar spent on all other purchases
60,000 points 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening
4. Use Your Card For All Regular And Recurring Expenses
Many cardholders have the wrong idea that to earn rewards, they need to start spending more. As a result, many look for the flimsiest reason to buy things to jack up their spending totals.
This is a very defective strategy, not just because you’re setting yourself up for debt but because you may be unnecessarily spending a lot more money.
If you’re like one of the average American consumers who make their day-to-day spending using their credit cards, there’s no need to spend more. Simply making your regular purchases with your cash-back credit card will increase your spending total without breaking the bank.
Practically, you can use a credit card for everything the average person pays for, whether groceries, gas, utilities, rent, clothes, etc. You can consolidate all spending onto your credit card and pay it off with cash when the card billing comes.
5. Master The Rules
Credit cards may appear similar, but each has its own rules for their rewards system. Each card issuer's system is a little different and learning exactly how each one works can help you maximize your points and rewards. You can redeem your points for different things – you can get cash back, gift cards, plane tickets, items, etc.
A simple cash back probably has the least return for your points, often having a 1:1 ratio – use it only when cashback is necessary.
Here's an interesting fact: when you use your points on purchases or exchanges through the travel portal, you'll typically come out way ahead since many portals give back 1.5x to 2x when you exchange your points. Choices are many, too, and can come in the form of gift cards to plane tickets for flights across the globe. However, it will depend on the exchange, their current deals, and promotions, their company partners or tie-ups, etc.
Knowing the categories and products that give you more for your points can save you more money than the points you've already accumulated. These portals usually partner with other reward portals, such as hotels and airlines. If you study the exchange values on transferring points from one system to another, you may get a big discount on some options.
Based on a US News survey conducted in 2019 to determine the most desired reward for a travel credit card holder, 25.8% of the respondents did not find their preferred reward among the 6 choices provided. Despite that, cash back was the most desired reward at 18.5%. Free hotel upgrades, was the least wanted reward with 6.2% of the responses.
6. Make Large Purchases Instead of Cash or a Debit Card
Do you need a new large-screen smart television? Looking at the latest laptop? Want to overhaul your wardrobe? All of these are great potentials for using your credit card. Just one transaction will instantly bring up your total spending up to a few hundred or even a thousand dollars. In the process, you will also increase your total points.
You can get extra benefits if you use your credit card to buy these items. You can get better fraud protection and extended warranty services from the manufacturer or store.
The important thing here is that you will use the card for convenience and rewards instead of paying with cash. This means that you already have the cash on hand to pay for these things and you really meant to buy them in the first place.
You are simply turning your planned spending into something more efficient and profitable for you. Do not fool yourself into thinking that you need to make major purchases that you don’t actually need or can’t afford just because of the big rewards that you will get.
7. Pay Your Total Balance Monthly as They Become Due
Even with all the sweeteners, always remember that a rewards credit card is still a debt facility. Therefore, it is important to pay off your total balance every month.
Cardholders who revolve their balances are actually on the losing end: they don’t benefit from the rewards and they pay a higher interest rate.
Experts say that most issuers get the funds to sustain their rewards program from the higher interest rates they charge on rewards cards.
Another thing you should not do is to miss a payment. Some card issuers will forfeit your rewards if you miss a payment. The same consequence applies for long periods of inactivity on your card. You may lose whatever rewards or cash backs you’ve earned but have not yet redeemed.
We recommend that you cash in or redeem your rewards periodically instead of trying to amass a huge amount. This way, you’ll get the full value of your rewards and you lessen the risk of losing them through the expiration of the points or issues with your use (or non-use) of the card.
8. Leverage Online Portals to Get Even More Rewards
Shopping portals are websites that offer rewards, such as bonus points or cashback, for using your credit card to make purchases through their site. To maximize rewards with these portals, you should compare rewards offered by different portals for the same merchant, and choose the portal with the best rewards for your purchase.
For example, the Chase Ultimate Rewards portal can provide significant savings compared to other redemption options. Booking travel through the American Express Travel Portal can help you maximize your rewards and get more value for your points.
Capital One Shopping alerts all users on its platform about the low price. Then, when checking out after shopping, the app will try to apply coupon codes to your order. You also earn credits when you make purchases online from retailers such as Walmart and eBay, which can be used to buy gift cards.
Additionally, you should sign up for the portal's rewards program and log into the portal before making a purchase, to ensure that the rewards are credited to your account.
It is important to note that rewards from shopping portals are in addition to any rewards offered by your credit card issuer for the same purchase. Therefore, by using shopping portals, you can increase the overall rewards earned for your online shopping.
What Else Can I Do To Make The Most Of My Card?
Knowing the ins and outs of your rewards credit cards can assist you in reaping all of their benefits.
Here are 3 additional aspects you need to follow to make sure you're getting the most out of your credit card rewards.
Fees. You won't have to worry about interest charges if you pay off your balance each month. In the meantime, you can work on improving your credit and then ask your credit card company to lower your interest rate later.
Each credit card company will have its own set of fees. However, there is no need to read all of the fine print from beginning to end in order to understand all of these charges. Most credit cards will prominently display their most common fees in their marketing materials. Some of the fees worth investigating further are:
- Annual fee – the annual fee compensates you for the convenience of using a credit card. Some cashback credit cards do not charge an annual fee.
- Balance transfer Fee – when you do a balance transfer, which is a transaction that allows you to transfer your balance from your old card to your new one, you must pay this fee. The fee is a percentage of the transferred balance and is usually set at 3% of the transaction amount or $5, whichever is greater. As a result, the higher the transfer fee, the greater the balance transferred.
- Cash Advance Fee – When you make a cash advance or an equivalent transaction, you must pay this fee. Overdraft protection and credit card convenience checks are also included in cash advance transactions.
Credit card debt is avoidable if you maintain spending and payment habits that keep you from getting in over your head.
One of the most effective ways to avoid credit card debt is to make on-time credit card payments.
If you miss a payment, your next payment will be much higher because you will have to make two payments plus the late fee. It becomes more difficult to catch up, strains your budget, and tempts you to use your credit cards to make ends meet.
The best way to avoid credit card debt is to pay off your entire balance each month. Starting each month with a zero balance completely eliminates the risk of incurring credit card debt.
Because your credit card has already been paid in full, you never have to worry about meeting the minimum payment. To accomplish this, you must be disciplined and only spend what you can afford to pay off in a year.
Credit cards aid in credit building because card issuers typically report your account and activity to the national credit bureaus—Experian, TransUnion, and Equifax. These details are then used by the bureaus to generate your credit reports, which serve as the foundation for your credit scores.
A credit card can either help or hurt your credit depending on how you use it. Focus on making on-time payments and avoiding maxing out your credit card to improve your credit score.
Checking your credit card statements regularly may also aid you in your quest to improve your credit. By keeping your balance at the forefront of your mind, you may be able to stay well below your credit limit.
Monitoring your credit can show you how that information accumulates over time and affects your credit score. Information demonstrating that you practice good financial habits, in particular, can reassure lenders that you may be prepared to handle other types of debt.
Is it better to get a credit card with cashback or rewards?
The answer to this depends on your lifestyle. For example, if you fly frequently, it might be better to get a card with rewards based on miles rather than getting cashback offers. If you are planning to charge a large purchase to the credit card though, having cashback rewards can be better because you will be able to use them towards paying off your balance.
Getting cashback rewards for places that you frequent often such as gas stations and supermarkets can also save you money in the long run. You will need to make sure you are making purchases at the places offered by your card though.
Should I pay bills with a credit card for rewards?
Paying your bills with a credit card for rewards has many perks such as accruing more rewards, having automatic payments that can save you time, much easier expense tracking, and the convenience of not having to write checks or pay-in person.
However, putting all your bills on credit cards is an easy way to rack up debt. Make sure you are paying off the bills every month from your credit card statement and not simply charging them to the card for the sole purpose of getting points or cash back.
What can you do with cash back rewards?
You can use cashback rewards to pay down the balance of your credit card every month. While this lowers your balance, most credit card companies do not allow you to use the cash back rewards in place of a minimum payment though.
You can also receive a certain percentage of money back every time you shop at certain places such as grocery stores, entertainment venues, or restaurants. Some companies also run promos where they offer more cashback for a certain month if you make electronic or other high-dollar purchases.
How do you redeem cash back?
The way you redeem your cashback offers depends on your card company. Most credit card companies allow you to get statement credits or checks. Some card companies also let you transfer the rewards to a bank account so that you can use them just as you would regular money or a paycheck.
Some companies even let you transfer the cashback to rewards or points instead of requesting the cashback. Keep in mind that some companies have a minimum balance you need to have before they allow you to transfer them.