Credit cards are for spending money — or at least, that’s what lenders want you to believe. In truth, there are a variety of ways you can take advantage of credit cards to earn back what you have spent.
Nearly every credit card issuer offers at least one card that boasts rewards. Rewards cards allow you to spend money as usual — but provide exciting benefits for doing so. There are all sorts of rewards cards available: those that give cash back for certain purchases, those that compensate for business spending, those that help with travel expenses, and more. The question isn’t whether or not you should get a rewards card — it is how you can maximize your rewards to make the most of your spending. Read on for five easy steps to make money by spending it.
Step 1: Assess Your Credit
Before you ever sign up for any credit card, rewards or no, you should check on your credit score. Opening a number of lines of credit all at once can definitely harm your score — as can closing credit accounts you were not able to keep up with — which will make it harder for you to get important loans later in life, perhaps for homes, cars, or new businesses.
Rewards cards aren’t for everyone. Credit card companies want to attract new cardholders, but only those who are able to pay them back. If your credit is poor, you might be surprised by an absurdly high rate — if you can get a rewards card at all. Once you know what your credit score is, you will have a better idea of what to expect in terms of rates, fees, rewards, and more.
Step 2: Assess Your Spending Habits
Rewards cards usually specialize in a specific type of spending; for example, some cards only give you rewards when you make travel-related purchases, like airplane tickets or hotel rooms. If you rarely make travel-related purchases, you will not be taking full advantage of your rewards card. Thus, to ensure you find a card that suits your spending, you should devote a few weeks to monitoring your spending habits before you commit to a specific card.
In addition to assessing how you currently spend money, you should consider what types of rewards align with your lifestyle. There are a number of different types of rewards, including:
- Travel and airline miles
- Gas and groceries
- Balance transfer
- General items (including jewelry, pet supplies, hotel stays, and more)
Not all rewards are appropriate for everyone. If you don’t have a car, gas rewards are not for you; likewise, if you don’t enjoy travel, airline miles will likely go unused. While it might be tempting to have a card that rewards you with potential new experiences, it might be smarter to apply for a card whose rewards you will definitely make the most of. So, if you do actually fly a lot for business, or pleasure, sign up for a travel rewards card over gas rewards.
Research on credit cards may not be the most thrilling step, but it is essential to finding the best rewards cards on the market. Fortunately, there are a number of online resources that make comparing and contrasting credit cards outrageously easy. Plenty of sites allow you to filter only the type of rewards you want, allowing you to look at how they vary. In particular, you should pay attention to annual fees, standard interest rates, and any introductory offers that set some cards apart. You should make a list of your favorite cards as you go.
Step 4: Apply, Apply, Apply
While the previous steps will help you find one or two cards that fit your style, this step will help you get the most out of credit card rewards. By applying for more than one type of rewards card, you could ensure that every purchase you make is also making you money. Of course, certain rules still apply: You shouldn’t sign up for rewards that you won’t make sufficient use of.
Step 5: Play by the Rules
Rewards cards have more strict regulations than standard credit cards primarily because credit card companies want to avoid paying out the rewards they promised. In order to earn the rewards you want, you must fully understand your cards’ rules — and play by them, too. Most importantly, you should be fully aware of any reward program expiration dates so you can redeem your points before they go away. Letting rewards expire is worse than not having access to any rewards at all.