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Understanding your credit card rewards program

Maximize Your Rewards With Your Credit Card Rewards Program

by / 0 Comments / Mar 31, 2015

Choose the best credit card rewards program. Know a card’s rewards value and uncover any potential downsides before selecting it for your wallet. Points/miles valuation varies from one card to the next. They can be devalued mid-stream as well. compare cards before making your selection. These tips will highlight some of the things you should be aware of when making your comparisons.

Points/Miles Valuation

While it’s fairly easy to determine how many points/miles you can earn with your rewards card, figuring out their value is another story. Just because a credit card rewards program offers you multiple points/miles for each dollar you spend, it doesn’t mean that card offers you the best rewards value.

To give you an idea of some of the different valuations, here are some generic points/miles valuations for a few of the card issuers with the best credit card rewards. These valuations are based on “ both the monetary value you get from it as well as the experiential value of its worth to you personally. ” Points valuations can be tricky and ever-changing. The following valuations are meant solely to give you a rough idea of how points vary from one credit card rewards program to another.

  • American Express points redeem at an average rate of 1.7 cents per point, when you weigh in all factors. For some things like airline and hotel purchases, point value is only 1 cent.
  • Chase points have an average 2 cent redemption rate, when all factors are considered, but the flat rate is about 1 cent per point.
  • Citi ThankYou Points redeem at an overall average rate of 1.1 cent, but the value starts much lower than that. As you stockpile more points, the redemption value increases.
  • Capital One points/miles typically redeem at about 1 cent.
  • Bank of America falls short, redeeming under 1 cent per point in many instances.

Potential Trouble Spots

There are potential pitfalls with any credit card rewards program. Here are a few to be aware of.

  • Large Introductory Bonuses
    Don’t spend more than you can or should in order to qualify for a signing rewards bonus.
  • Rotating Categories
    This is similar to overspending to earn your signing bonus. Don’t purchase something with your card just because it’s in the current quarter for max rewards. If you have a card that offers its top credit card reward for rotating categories, try to plan your big purchases with these categories in mind. With the right planning, you can save big on expensive items like appliances. Also be sure to register or sign up when required. Many issuers require this every quarter.
  • Annual Fees
    These aren’t always bad, but look at the amount you will save with your rewards and compare it to the fee you will be spending each year for your card. For example, if the annual fee is $89 and you earn 3% cash back on gas and grocery purchases that’s capped at $1,500 every quarter, the maximum cash back you can earn is $180, before the rate drops to 1%. That’s a good return as long as you normally spend $6,000 a year on gas and groceries.
  • Rewards or Purchase Caps
    Look for caps on the amount of points/miles/cash back you can earn through your credit cards rewards program. 5X miles/points for your grocery purchases might sound wonderful, but if the purchase amount is capped at $2,000 for the year, the maximum 10,000 points/miles may not be worth it, especially if the card has an annual fee and low points/miles valuation.
  • Expiring Points/Miles
    This has become far less common, but some issuers still offer points/miles that expire.
  • Eligibility
    Some cards require a minimum amount of usage to keep your rewards active. Check whether inactivity or even late payments affect your rewards.
  • Balances
    Carrying a balance on your rewards card is a bad idea. The APR will eat up any savings you may earn with cash back, points or miles.
  • Thresholds
    It’s fairly common to set a minimum threshold you must reach before you can redeem your rewards points/miles. For example, with Bank of America, you have to earn 2,500 World Points to redeem them for cash or travel. For the purchase of gift cards, you must have at least 3,500 points.

Do Your Research
Before applying for a card with a credit cards rewards program, do your research. Find out its points valuation and carefully read the card’s terms and conditions. This will expose the true value of the rewards and uncover potential pitfalls to be avoided. Do your research to help select the best reward credit card offer.

About the Author

Elizabeth Boyd is a financial writer and paralegal. She has written extensively for the financial and credit card market for several years and feels strongly about making consumers aware of their choices and rights.

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