How to Maximize Your Credit Card Reward Points

by Neal Frankle, CFP ®

 

Today we have a guest post from the Car Negotiation Coach, who takes a break from discussing car negotiation strategies to talk about how to maximize your credit card reward points.

You can earn rewards points for just about anything these days. Of course you must be careful to avoid credit card tricks that the issuing companies use to keep you from using those points. And most people don’t pay much attention to their accounts until they try to redeem awards. The average person can accumulate points valued from a couple hundred to a couple thousand dollars per year (tax-free). But unnoticed expiration dates, balances scattered across multiple programs and blackout dates make it easy for those points to lose value. That’s why it’s important to pay close attention and take an active approach to managing your rewards accounts.

 

Here are some tips to maximize reward point value:

    • Try to build balances in fewer programs. This means fly one or two airlines, stay at the same hotel chain, frequent the same grocery store and use just one rewards credit card.

 

  • Select and use credit card programs tailored towards your spending habits. If you are a frequent traveler a mileage card might be best. If you never fly but drive all over town then a gas card might fit you better.
  • Avoid maintenance fees. Select a card that does not require you to pay annual maintenance fees unless you’re certain the benefit outweighs the cost. There are plenty of no fee cards available.
  • Avoid buying electronics. Never use your points to buy electronics. You’ll typically spend many times more than the item is worth in terms of “point value.” Travel rewards or cash-back are almost always a better value.
  • Keep track of expiration dates. Many programs will expire your points after a period of inactivity. Letting your points expire is like giving your money away.

How to Track your Accounts

The key to managing your accounts is to track them in one place and review them on a regular basis. My preference is to track my miles in a simple Excel Spreadsheet. I find the act of updating account details myself causes me to play closer attention. When I do so, sometimes I notice that it actually makes sense to switch credit cards to those with more generous benefits. I also like that I can easily retrieve my account numbers and passwords using the spreadsheet. However, if you do include user IDs and passwords, as a safeguard you may want to password protect the Excel document. Here’s a sample of my tracking system:

If you find this to be too much work, then use one of the free online programs that will track your balances for you, like Points.com, Mileport or Award Wallet. However, you’ll still have to remember all your passwords to book your rewards.

Just like you manage your budget, it pays to keep track of your rewards points. The companies that offer rewards programs are required to treat points as liabilities on their books, but oddly enough, the people who earn the points often fail to treat them as assets. If you leave your accounts on auto-pilot, you’re missing out on getting full value from this often under-managed asset.

Do you have any tips for managing rewards or getting the most value from them?

Thanks, Geoff. I have to admit that my wife is the keeper of the reward points…but I’m going to share this with her and maybe she’ll allow me to get a new iPod…oh…I forgot…no electronics!

Looks like I’m out of luck…but you’re not…

Here are your weekend reading assignments:

How to Save Money with Open Source Software

My buddy Jeff Rose helps you get protection from identity theft.

The Junior Boomer discusses investing with a discount brokerage online.

Matt talks about the benefits of acting wealthy.

My buddy Mike just brought over a ton of fantastic info from his tax site. If you’re trying to understand the benefits of an LLC versus S Corp or C Corp…check this out.

My Canadian pal Tom thinks frugality can lead to happiness. Do you agree?

Do you need to change a credit application denial? Here’s how.

Panda Mike talks about his best financial moves in college.

Ryan talks about what to do with a financial windfall.

Yakezie Carnival and Best of Money were kind enough to include me in their roundups. Please visit often!

 

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{ 4 comments… read them below or add one }

Steve in W MA September 25, 2010 at 9:33 PM

If you really want to maximize your “rewards” then just stop spending so much money, credit cards or not. It’s much more effective than getting 2% back on stuff you didn’t really need to spend money on.

My cash back rewards are just a little free money from my $200 per month food budget and $80 per month gas budget, with the occasional car part purchase in between. The rewards come to $50-$100, depending on the rewards card I can use.

I’m serious, just stop spending so much money. It’s highly rewarding to your savings.

Reply

Steve in W MA September 25, 2010 at 9:28 PM

Basically, I concentrate my spending on no more than 2 cards. I don’t travel much so I can’t see using points for miles. I just focus on cash back. I put all of my normal spending that is within my monthly budget on the cards.–this is important, if you don’t keep a strict budget every month credit cards will mess you up.

every few months Discover offers me 2% for grocery expenditures up to $500 so I run out and buy $500 in gift cards to my grocery store. I get the $10 and apply it to savings once I am able to get reimbursed. I use the gift cards to buy my groceries.

If I get double cash back offers on gas, I buy a gas station gift card equal to several months’ worth of gas. Again, I get the cash back to the maximum allowed by the card all in one transaction by doing it this way.

Since I cannot afford much beyond basic necessities, I focus on getting a card with great rewards on gas and groceries. I am applying for a PenFed Visa that gives 5percent on gas and 2% on groceries at all times, and one percent on everything else. If I am approved for that then I won’t need to use the gift card method anymore–although to tell the truth, buying three months’ worth of gift cards to a grocery store is a great way to build end enforce commitment to continue to maximize my food budget by eating in and I may continue to do that. When I’ve already spent all my food money on the Stop & Shop gift cards, it makes it feel like if I want to eat I have to get my food at the grocery store and cook it, which is a good thing for the budget. And to tell the truth my food is at least as good as most stuff I eat at restaurants.

Reply

justin goodman June 12, 2010 at 8:10 AM

I used Chase freedom and always save up till I have $200 in rewards, then get a $250 rewards check. I am all about the cash back rewards, as i dont really do much traveling, so flights dont do much for me.

Reply

Tom @ Canadian Finance Blog June 11, 2010 at 8:49 PM

Thanks for the mention Neal, have a good weekend!

Reply

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