Reward Credit Card Mistakes
Rewards credit cards are the new black! They allow you to collect a variety of points, cash back bonuses and airline miles just by using them. They reward your loyalty and usage by giving you something back. However, just like with any credit card, there are downsides to rewards credit cards if you do not manage them properly. Today we explore some of the reward credit card mistakes you could be making and how to mitigate against them.
Getting Too Many Reward Credit Cards
A rewards credit card is still a credit card. It affects your credit score the way a normal credit card does. Opening too many rewards credit card accounts is bound to negatively affect your credit score. As with any credit card application, your credit background will be checked. Too many checks and lenders might get suspicious of your activities and downgrade your score.
Secondly, rewards credit cards award loyalty. With many credit cards you stand s smaller chance of accumulating any significant rewards with any program. As commonly said, you are spread too thin. The best solution for you is to consolidate your cards or programs and focus on one or two that fit your needs.
Overspending to Acquire Miles
The idea of earning miles and using them to fly free is alluring. It makes you want to grab your card and go on a spending spree. However, before you do that, consider the implications. You still have to clear the charges you make on the card. You have been loaned money and you will pay it back, with interest! Ask yourself whether the miles you earn are worth the interest you pay at the end of each month.
This is a rather common rewards credit card mistake. The best solution is to use your card normally. Follow your budget when using your rewards credit card. Do not under any circumstance go overboard just to earn the miles. It might lead you into unnecessary debt.
Paying Interest On Reward Credit Cards
Rewards credit cards have higher interest rates than normal credit cards. Many users make the mistake of accumulating huge balances on their cards and end up paying hefty interest rates and late payment fees. As with any credit card, ensure that you pay off your credit card balances on time each month. This will reflect well on your credit score and save you a tonne. It also means you earn rewards cheaply since you are paying normal interest rates and have no penalties.
Forgetting About Rewards
Do you know the rewards you have with all your reward credit card programs? You will be surprised by how many users are unaware of what they have accumulated so far. If anything, this is one of the more prevalent reward credit card mistakes! Users simply forget about their rewards. The rewards end up expired or devalued since owners fail to claim them.
Consider your credit card rewards an investment. Something of value. With any investment you want to know the performance and rate of return. Keep track of the programs you sign up for and what they offer in terms of rewards. You can sign up for services that allow easy tracking of your rewards such as Awards Wallet. You can also download apps to easily manage your points.
Redeeming the Wrong Reward
Most reward credit card users do not calculate the value of their redemptions. You get a raw deal when you fail to weigh the options. Of the available rewards for redemption, choose the one that makes the most economic sense while satisfying a need. For example, while it might be tempting to shell out 30,000 points for a trip to Mexico, basic math shows it is not an optimal choice. It would be cheaper to pay for the trip in cash! You can instead redeem your points for a gift card or item.
The reality is, redeeming points isn’t as easy as walking into Starbucks and ordering your morning latte. It’s a process. Lengthy at times. You do not always get what you want when you want it. Keep that fact in mind when earning and redeeming your rewards. Adjust your expectations accordingly. If you plan on redeeming your rewards and miles, plan well in advance. Book flights early and confirm often before your travel date.
Reward credit cards offer consumers a way of getting something back for money spent. They are not perfect, but, they are better than nothing. Used responsibly and managed carefully, these cards open opportunities for you to enjoy free rewards. You can make the most of your card by avoiding the reward credit card mistakes discussed and implementing the simple suggestions. There is much to be enjoyed if you plan well in advance and stick to your program!
What mistake has affected you the most and how have you solved it? Please, let us learn from each other in the comments below 🙂