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How to Use Your Credit Cards Rewards Program for Realistic Rewards

Your credit card’s rewards program can be very beneficial – if you’re realistic about spending money! Here are several tips for using credit cards to your advantage, without going into credit card debt.

“If you think rewards credit cards are an easy way to earn free stuff, do not open one,” says Ann Smarty, who wrote this guest post. “Like low rates and balance transfer offers, rewards programs are a marketing tool. The point is to persuade you to open an account. And once you have an accessible line of credit at your disposal, it is easy to overspend, especially if making purchases means earning more rewards. If you aren’t careful, you’ll end up paying to use your own money, and high interest rates will cancel out all those appealing rewards.”

If you’re hoping to use your credit card’s rewards programs to pay off your existing debt, you may have to rework your plan! Read The Total Money Makeover: A Proven Plan for Financial Fitness for help managing your money – it’s Amazon’s bestselling financial book.

And, here are four tips for using your credit card to reap financial rewards (and possibly help you achieve your financial goals!)…

How to Use Your Credit Card’s Rewards Program for Realistic Rewards

You need the right combination of restraint and budgeting to come out ahead in the rewards credit card game. Read, and truly understand, all the fine print on your credit card application before you start spending money.

But ultimately it boils down to a rather simple equation: Cash Back Credit Card + Common Sense = Realistic Rewards.

Here are four tips for rewards programs:

1. Use a cash back credit card.  There are several types of rewards programs, but keep it simple. When you earn a dollar in rewards, take a dollar — instead of merchandise or vacations. The best way to use your credit card’s rewards program is to remember that you’re better off spending less money or earning more money, not accumulating more possessions or more debt. Points programs can be restrictive, and a free plane ticket can lead to an expensive hotel room and restaurant meals. Whether you get a statement credit or a check in the mail, remember that cash back makes more sense than other types of rewards.

2. Don’t carry a balance on your credit card. The same common sense rules that apply to other credit cards apply to rewards cards. That means not spending more money than you can afford to pay off each month. You need to keep your charges in check to avoid credit card debt. But what if you are really close to hitting a cash back bonus? Or what if you need to spend more now so you can get to the next rewards level? Don’t do it! A credit card is still a credit card. And while a rewards program helps you justify spending more in the moment, you’ll get the short end of the stick if you pay interest.

3. Earn realistic rewards. It is unlikely, and probably financially unwise, to spend hundreds upon hundreds of dollars on your credit card. And it’s easy to trick yourself into putting too much on your card if you are expecting a huge payoff. So, be realistic about using your credit card for a rewards program.

4. Set up a free online bill payment for your utilities. Slow and steady returns aren’t super exciting, but they are smart! As time goes by and you know you will be responsible about paying the bill, you can experiment with ways to maximize your credit card rewards. Set up a free online bill pay for your utilities or use it for small purchases you normally cover with cash.  You can even pay your taxes with a credit card. These days you can use credit cards for pretty much everything, which means there are plenty of opportunities to earn cash back. Just make sure your rewards credit card is helping you achieve your financial goals — not the credit card company’s goals.

To learn more smart ways to handle credit cards, read Should You Cancel Old Credit Card Accounts?

This is a guest post by Viral Mom.

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2 thoughts on “How to Use Your Credit Cards Rewards Program for Realistic Rewards”

  1. Correct, no matter how we earn cash back rewards on our credit card it is still important to put into consideration how we manage to spend.

  2. Laurie Pawlik-Kienlen

    Here’s an email from the financial experts at DailyWorth.com:

    You hear about cash-back cards all the time—but which ones deliver the goods? These four cards deliver the most buck for your bang. But remember: As with most rewards cards, you MUST pay your balance in full and on time each month or get hit with steep late fees and interest rates.

    Chase Freedom – You earn an unlimited 1% cash back on all purchases, and 5% cash back on rotating categories of purchases like gas, groceries, travel, and more (a quarterly maximum applies). No annual fee.

    Discover More – This is a great cash back card—but it requires patience. You can earn 5% cash back (up to a maximum), but it does so in rotating categories (hence the need for patience). It also gives you up to 1% cash back on many other purchases—unlimited! Read the fine print. No annual fee.

    Blue Cash from American Express – Hey, big spenders—this is the card for you! Charge less than $6,500 per year and Blue Cash offers 1% cash back on purchases at supermarkets, drug stores and gas stations and 0.5% cash back on all other items. Spend more than $6,500 in a year and earn 5% cash back on those three categories—and 1.25% on other items. Rewards are unlimited. No annual fee.

    Capitol One No Hassle Cash Rewards – No hassle indeed: You get 2% cash back on gas and grocery purchases and 1% on all other purchases—and the rewards are unlimited. The card has an annual fee that varies according to your credit score.

    If you want to achieve your financial goals, remember to choose a card that complements your spending habits (e.g. big grocery buyers should go for a card with a nice kick-back on groceries); has no or a low annual fee and doesn’t severely restrict the cash rewards.