Credit card rewards can be very valuable, but there are a lot of mistakes you can make along the way.
How do I know? I’ve racked up close to one million airline reward miles in the past four years. But most of those rewards haven’t come from flying. They’ve come from credit card rewards.
These rewards can be extremely valuable if you use them right. For example, I flew round-trip from the US to India with stops in Nepal and Japan for just $120 plus taxes. The rest was covered by 80,000 frequent flyer miles, which I earned with nothing but regular spending on my credit card.
Not interested in racking up frequent flyer miles? Cash back and other rewards can also be worth hundreds or thousands of dollars, too.
I’ve made my share of mistakes along the way and learned some important lessons that cost me money. But that didn’t have to be the case. Before you sign up for various rewards credit cards, make sure you’re doing it right. Here’s my guide to finding and earning the best credit card rewards.
1. The best rewards credit card rewards the ones you’ll use
If you do decide to start earning rewards, be sure to get rewards you’ll actually use. Earning a lot of rewards from just anywhere isn’t worth your time and effort. Choosing the best rewards credit card means finding one that meets your needs—and skipping those that don’t.
For example, I earned around 80,000 airline miles from one airline credit card—miles that must be redeemed through this carrier. Three years later, I still have about 70,000 of those miles sitting in my account. The reason? The airline I would need to fly to redeem them isn’t a great fit for my travel habits.
Keep in mind that rewards can expire, too. Most last for at least a few years, but sometimes you don’t always get around to taking trips when you think you will. Once miles expire, they’re worth nothing to you.
2. Maximize rewards with a few tricks
Standard rewards include earning sometime like 1 to 2 miles per dollar spent or 1% cash back on purchases. While these rewards can add up, it’s a very slow way to earn rewards. Look at the math: Spending $10,000 on a 1% cash back card to get $100 cash back doesn’t get me very excited. Fortunately, there are better ways to earn.
Some of the most valuable rewards are introductory bonuses. This is where you might get something like 50,000 airline miles when you spend $3,000 on your new card within 3 months of opening your account. That’s almost 17 miles per dollar spent, which is much better than the average earning rate of 1 to 2 miles per dollar spent.
In addition to looking for introductory bonuses, you can earn higher percentages on cash back cards, too.
Many rewards programs offer extra miles or cash back if you shop through a portal. For example, Discover offers extra cash back on stores you likely shop at all the time. All you have to do is go to the website through their ShopDiscover page and use your Discover Card to check out. Some current offers include 5% back at Home Depot and Walmart, 10% back on Fandango and Macy’s, and 25% on ProFlowers. The list includes dozens more.
Cash back cards often feature promotions for certain spending periods. For example, the Chase Freedom card currently offers 5% cash back on all restaurants as well select retailers like Bed, Bath & Beyond and H&M from now through June.
3. Examine the fees
Rewards cards can come with more and higher fees than you’d find on other types of credit cards.
There are a few different fees to watch out for. Many times, rewards credit cards have higher interest rates than standard credit cards. Many rewards credit cards also charge an annual fee to use them. These fees are often around $100 per year—another cost that eats into the value of your rewards.
Before choosing a card, make sure you read the fine print and figure out which fees come with your card.
4. Redeeming rewards can be difficult
While rewards can be super valuable, especially on international and first-class flights, booking isn’t always easy. When I earned enough miles to fly to Thailand, I was excited—until I realized I had no idea how to use those miles to get there.
Your best bet is to understand how you’ll redeem rewards before you earn them. With cash back rewards, this is usually simple. Your cash back is often automatically credited on your statement without you needing to take action.
For airline miles, it can be more complicated. If you fly a certain airline regularly, you might already have an idea of where you can fly with the airline and how to redeem miles. But if you’re thinking about branching out beyond your normal preferences, be sure to read up on how the rewards process works.
For some guidance, check The Points Guy’s Beginner’s Guide. The Points Guy specializes in earning frequent flyer miles with lots of helpful resources for devising a strategy for yourself.
5. Be careful to avoid debt
It’s easy to get caught up in the credit card rewards game. I’ve been guilty of thinking, “Buying this $300 iPhone is expensive, but hey, at least I’m earning rewards to get it!” But this is the wrong way to think about it, and it can land you in financial trouble.
So how do you deal with this? Make sure you aren’t spending more just because you’re using a rewards credit card.
It’s not always an easy thing to do, but one way is to apply for only those rewards offers that you can meet without increasing your spending.
In any case, you should always be able to pay off your credit card bills in full each month. Credit cards have some of the highest interest rates—think 2 to 3 times or more than interest rates on student loans.
If you’re not able to pay off credit card bills every month, attempting to earn credit card rewards probably isn’t a good idea for you.
Do you routinely earn credit card rewards? What have you learned?
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
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3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|