Credit card rewards are a favorite topic around the NerdWallet office. After all, who wouldn’t want to earn cash or travel rewards on their everyday purchases? But while rewards cards may seem straightforward — spend, earn rewards, redeem rewards, repeat — they may not be so simple. Here are four important tips to keep in mind when earning and redeeming credit card rewards.
1. Check the value of each redemption option before you cash in.
While rewards credit cards tend to be categorized as cash-back or travel cards, most offer multiple redemption options. However, you will likely find that not all of these options are created equal. Pay attention to the value of each redemption option and consider choosing the option that gives you the most value for your dollars, points or miles. If you find that your redemption preference doesn’t give you the best value for your rewards, you should consider getting a credit card that better suits your reward needs.
2. Be sure to know your card’s miles/points expiration policy.
They say that only death and taxes are certain, and they’re pretty much right. As much as we’d love to tell you that credit card rewards will be waiting for you when you’re ready to use them, this isn’t a guarantee. To avoid losing your rewards, be sure to know the expiration policy on your miles or points. If your card’s rewards don’t expire, feel free to add “and my credit card rewards” to the certainty adage.
3. Know when you can and can’t redeem rewards.
Travel rewards may have restrictions, or “blackout dates,” on redemption. Check your credit card’s benefits statement to find out if there are any limits on which dates and flights you can redeem for, and try to keep your travel dates flexible if limits exist. If dates aren’t flexible and they happen to fall during a blackout period, you’ll have to save your redemption for another trip. Also, understand that not all cards have blackout periods. You may want to get a new credit card with more flexibility for future use.
4. You can’t outearn the interest you’ll pay if you carry a credit card balance.
Even the best credit cards have higher interest rates than rewards rates. So if you’re thinking you can simply make the minimum payment each month because you’re earning rewards, you’re getting a bad deal. Instead, make sure to pay your entire credit card balance on or before the due date each month and reap the rewards without paying interest charges.
Also, ensure that any fees you’re paying — like annual fees — are heavily outweighed by the rewards you’re earning. And never pay unnecessary fees, such as foreign transaction fees, because your rewards likely won’t be enough to make up for them. There are great credit cards without foreign transaction and other unnecessary fees.
The takeaway: Rewards credit cards are great, but you need to know how to properly earn and redeem your rewards. Understand the redemption options available to you, the expiration policy on your miles/points, and any possible blackout dates. Also, remember that no amount of credit card rewards will make carrying a balance from month to month a good deal. Now go forth and get rewarded!
Rewards image via Shutterstock