Getting a credit card that offers a good rewards program is a smart idea. You do your spending as usual, all the while racking up points, miles or cash back.
But some people aren’t content to just earn average rewards from their cards. These credit card “hackers” are constantly coming up with schemes to eek out as many perks as possible. Unfortunately, some common credit card tricks can backfire. Take a look below at five credit card hacks that (probably) aren’t.
1. Buying merchandise at the gas station
If you have a credit card that offers bonus cash in rotating quarterly categories, you’ve probably considered ways to drive up your spending at featured retailers. Gas stations commonly appear in rotating bonus offers, so many credit card hackers think they can buy merchandise in the gas station’s retail store to get the extra cash back.
But this credit card hack often doesn’t work. Many credit card issuers code purchases made at the pump differently from purchases made in the gas station’s storefront — and they’ll only provide a bonus for spending at the pump. You’ll need to check with your credit card company to see how they code gas station spending, but don’t assume this is a fool-proof hack.
2. Canceling a card before paying the annual fee
Credit cards that carry an annual fee usually also provide a hefty sign-up bonus to new customers. As an added perk, it’s common for issuers to waive annual fees for the first year. This has led many hackers to sign up for a bunch of cards, get the welcome bonuses, then cancel the cards before having to pay an annual fee.
However, the joke may be on them: If you don’t use the points or transfer miles to your frequent flyer account before closing the card, you could lose them. Issuers vary a lot in their policies, but you’ll have to be careful about your rewards when closing an account. Be sure to read your card’s terms and conditions thoroughly!
3. Canceling and reopening a card for multiple sign-up bonuses
Opening and closing a card several times to get the sign-up bonus many times over is a common hacker’s trick. While many issuers still allow this as long as you haven’t had the card open in the past year, American Express recently announced it was putting a stop to this practice. Starting on May 1, 2014, you’ll have a lifetime limit of one sign-up bonus per AmEx card (with a few exceptions).
American Express is only one issuer, but many credit card hackers predict that AmEx’s move is a sign of things to come. In other words, you might be able to use this hack now, but don’t count on it sticking around.
4. Purchasing prepaid cards with credit
Many credit card hackers get frustrated when they can’t use their plastic to pay for regular expenses, like rent or utilities. A solution to this is to use credit cards to purchase prepaid products, then use the prepaid card to pay bills.
But many retailers that provide prepaid refills have caught on to this trick and are now forcing customers to use cash. There have been reports that some CVS retailers have stopped accepting credit cards for a popular type of reloadable card, much to the disappointment of many hackers. Sorry, guys – you’ll have to start paying bills with your checking account like the rest of us!
5. Getting in over your head
People who are new to credit card hacking often get excited, open a lot of cards and then quickly lose track of their spending. This can spiral out of control and lead to missed payments, fees and debt. Not only is losing control of your cards costly and damaging to your credit, you also might have your rewards program canceled if you consistently miss payments.
Getting in over your head with credit cards is the ultimate anti-hack. Only take on as many cards as you can handle, and never use rewards to justify overspending.
The bottom line: There are some great ideas out there to maximize credit card rewards, but not every hack works out as planned. The next time you think you’re gaming your credit card company, be sure to keep in mind these hacks that aren’t!