Congrats—you applied for a new rewards credit card, and now it's burning a hole in your pocket, ready to help you rack up points and perks. But are you sure you're milking it for all it's worth?
The key to maximizing credit card rewards is to plan out your strategy in advance and know exactly what each card in your wallet can do for you. Follow these steps to make the most of your new card:
1. Charge everything.
You'll earn rewards faster if you put all your monthly spending on your credit card. Most rewards programs offer you a certain percentage or number of points for every dollar you spend in purchases, so use your credit card to pay for as many purchases and expenses you can each month. This strategy comes with one important caveat: You must also pay off all these purchases at the end of each billing cycle so you don't incur any interest. If you don't pay off the entire balance each month, the interest you'll end up paying will outweigh any rewards you earn.
You should also make sure that if you are charging all your expenses, your credit utilization ratio remains low. That means your monthly spending should not exceed 30% of your available credit (keep it below 10% for the best credit scores). For more information, see Experian's guide on how much credit you should use.
The final caveat? Don't spend money just to earn rewards, and don't spend more than you would have in the first place. Just shift the spending you're already doing in cash to your credit card.
2. Consolidate most of your spending on one card—but be strategic.
Your goal should be to put the bulk of your spending on one main credit card. Why? You'll rack up rewards more quickly if you're focused on one rewards program. There is an exception to this rule, however. Additional cards can help you boost your earnings if you use them strategically. For example, say you put most of your primary spending on the Citi® Double Cash Card, which gives you the opportunity to earn 2% back on cash purchases. That's a great way to rack up cash back fast. However, adding another no-fee card, such as the Discover it® Cash Back, can boost your rewards to 5% back in specific rotating categories, like grocery stores, gas stations and restaurants. If you're able to get a significant earnings boost on a particular spending category, use the card that does that for you.
3. Pay attention to bonus categories.
In addition to Discover, several cards, such as Chase Freedom®, offer rotating bonus categories in which you can earn significantly more rewards. Typically, you must log into your credit card account online and "activate" the opportunity to earn bonus rewards in the specified categories. It can be easy to forget whether you've done that or which categories are incurring extra rewards at any given time. When you get your card, look up the bonus categories calendar on your card issuer's website and make a note of them in your calendar. Set up calendar reminders to activate the categories each quarter and to remember to use your card on those purchases during that period.
Another bonus category to pay attention to? Mobile wallets like Apple Pay. Some credit cards will actually offer you additional rewards if you use your card in conjunction with a mobile wallet. For example, the Wells Fargo Cash Wise Visa® Card offers unlimited 1.5% cash back on purchases, but you'll get 1.8% cash rewards on qualified mobile wallet purchases during the first 12 months of your account.
4. Take advantage of hidden benefits and discounts.
Make sure your know what advantages your card offers, because these terms can save you money and unlock extra benefits not available to everyone. For example, certain cobranded airline credit cards can help you save on purchases with their airlines. The Gold Delta SkyMiles® Credit Card from American Express offers 20% off in-flight purchases of food, beverages and audio headsets. If you have the Chase Sapphire Preferred® Card and your flight (that you paid for with the card) is delayed for more than six hours, you can be reimbursed for essential purchases, such as toiletries and clothing, up to $100 a day for five days.
Take some time to pore through your card's benefits handbook, which you should have received when you opened your account. If you can't find it, ask your issuer to resend you a copy.
5. Redeem rewards strategically for maximum benefit.
Once you rack up a bunch of rewards, you should know that you can get more bang for those points if you redeem them smartly. For example, if you redeem your Discover cash back for a gift card, you'll get an extra $5 on a number of different brands. Chase Sapphire Preferred® points are worth 25% more when you redeem them for airfare, hotels, car rentals and cruises through the Chase Ultimate Rewards Portal. But you can also transfer them to Chase hotel and airline partners on a 1:1 basis, and in some cases, you could do a transfer and redeem them for significantly more value. Other cards will boost your reward points value if you use them in the card's shopping portal.
6. Pay attention to the fine print.
Each rewards program comes with its own terms, and it's smart to acquaint yourself with them at the outset. Check if and when your rewards points will expire. Find out what types of transactions will not earn rewards. For example, balance transfers or cash advances typically don't generate rewards points.
7. Pay off your balance.
We've said it before, but it bears repeating. Pay down your balance on time every month. Interest charges and late fees will wipe out any benefit you may have earned from your rewards.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.