Earning rewards based on your credit card spending can be thrilling. After all, who doesn’t love to get more bang for their buck?
Used strategically, “rewards are free money,” says Ted Rossman, senior industry analyst for CreditCards.com and Bankrate. For instance, Rossman earned more than $2,300 in cash back last year by paying for everyday expenses such as food, gas and streaming services for his family of four using three cash back credit cards: American Express Blue Cash Preferred ($95 annual fee, waived the first year), Chase Freedom Flex and Wells Fargo Active Cash. “That’s meaningful,” he says. “Credit card rewards are an inflation buster.”
As the holiday season approaches, this is an ideal time to get some extra cash back in your bank account, as well as to capitalize on credit card perks that can make everything from gift buying to travel more affordable and enjoyable. (Just make sure you pay off your credit card balance in full each month to avoid interest charges).
Ready to get more out of your credit card rewards? Here’s what to do.
Understand your current credit card's rewards
Familiarize yourself with the rewards that each of your credit cards provide. Rewards typically come in one of three forms: cash back as a percentage of your purchases; points, which can be redeemed for items and services such as merchandise, gift cards, cash and travel; or miles, which are mainly exchangeable for travel-related awards, such as flights or hotel stays.
To get details, call your credit card issuer’s customer service line or look up your benefits on its website or app. When you review rewards information online or on paper, pay attention to the asterisks and plus signs that designate footnotes, as they often list additional perks and restrictions. “Read the fine print,” advises Daisy Hernandez, credit cards editor at The Points Guy, a website that provides tips and tools for managing rewards. There may be limits, for example, on the total amount of rewards you can earn in a certain category or over a specific period.
Then make a list of which cards are best to use for specific spending situations, such as buying groceries, getting gas and dining out. For instance, you may get 6% cash back on groceries with one card and 2% cash back with another. In that case, you’ll want to pull out the former when you shop for food. Or, if you are planning to travel abroad, bring a card with no foreign transaction fees. “Know the ins and outs of your program, and match your lifestyle to your card,” says Rossman.
If memorization isn’t your strong suit, create a quick-reference guide that lists which cards to use for different purposes. Keep it in a handy place, such as in your wallet or the notes app on your phone. You can even jot down details directly on your credit cards in permanent marker or wrap the card in a sticky note that specifies where to use it.
Keeping track may feel daunting at first, but you’ll eventually develop a routine, says Hernandez. “It can take a little while to get there, but once it’s set in your head, you’ll automatically know what to reach for,” she says.
Explore other credit card options
If you’re still using a credit card that you opened decades ago, it’s likely time for an upgrade. In fact, all of your low- or no-reward cards might need a refresh. “If you have old cards languishing, there’s probably something better out there for you,” says Rossman.
But be aware that if you close any of your existing cards, eventually they’ll stop contributing to the length of your credit history — and a long credit history boosts your credit score. (Accounts that are closed in good standing, however, remain on your credit report and contribute to your credit-history length for up to 10 years). In addition, your overall credit limit among all the cards you have will decrease when you close a card. If you have balances on other cards that you keep open, your credit-utilization ratio — the percentage of available credit that you use on your cards — could rise, and a high utilization ratio hurts your credit score. It’s often best to leave a card open even if you don’t plan to use it much, unless you’re paying an annual fee.
Alternatively, you could ask your issuer about a “product upgrade,” which allows you to switch to a different card from the same provider while keeping your account history and available credit. You can also explore getting a completely new card that matches your spending patterns and goals. We've rounded up the best rewards credit cards in a dozen categories to help you choose.
Avoid applying for several credit cards at once. Each application creates a “hard” inquiry from the lender on your credit report, and multiple card inquiries that appear in a short period can ding your credit score. The general advice is to apply for credit no more than once every six months or so, says Rossman.
The holiday season can be an ideal time to apply for a new card. Many come with sign-up bonuses of extra cash or other perks, which can offset gift-buying bills or help with travel expenses. In addition, you often need to spend a certain amount to earn those bonuses, which can tie in nicely during a period when most people naturally increase their spending.
Before applying, carefully assess a card’s advantages and restrictions. Check to see whether it has an annual fee. If so, make sure the rewards will outweigh the cost for you. As an example, Hernandez says that one of her credit cards has a $95 annual fee. Yet she’s earned more than five times that amount back in rewards within a year. “That card is more than worth it,” she says. “That’s money back in my pocket.”
Both she and Rossman caution that you should sign up for a new card only if you can pay off the balance in full each month. Also, prioritize paying off any existing credit card debt before opening a new card. “If you have credit card debt, don’t play the rewards game,” says Rossman. “It’s not worth paying 20% interest to get 1%, 2% or even 5% in cash back.”
When choosing the card that’s best for you, use a “know thyself” approach, he adds. Find one that matches your preferences, spending style and comfort level.
If juggling multiple rewards cards feels overwhelming, you can still reap significant value from a basic card that offers 2% cash back on all spending. In fact, for many people, a 2% card could outperform a card that gives you, say, 5% in one category and 1% on everything else. Consider Citi Double Cash and Wells Fargo Active Cash, which both offer 2% back on everything you buy.
Supercharge your credit card rewards
In general, you’ll get the most value if you redeem your rewards in a way that aligns with your card’s primary purpose, says Rossman. If you have a travel card, it’s usually best to redeem points or miles that you earn with it for travel-related perks. With Chase Sapphire Preferred ($95 annual fee), for example, points are worth 1.25 cents apiece when you use them to book reservations through Chase Travel; otherwise, you get a value of 1 cent per point if you redeem them for cash back or gift cards. With many American Express cards, point values are often strongest if you trade points for certain travel-related purchases, such as flights booked through American Express Travel.
If you have a standard cash-back card, resist the urge to redeem your rewards when shopping online or paying at a store checkout counter; the redemption value is usually weaker than what you’ll get if you exchange the rewards for a statement credit or a check. “Normally, when you redeem at Amazon or another retailer, you’ll get a rate of something like 0.8 cent per point,” Rossman says. (Some cash-back cards issue rewards as points, which can be redeemed for cash or other options.) “Whereas with a statement credit, you’re going to get a full cent per point. So if you have a 2% cash back card and you redeem your rewards at Amazon, you’re probably getting the equivalent of about 1.6% cash back.”
But there is a method to get better value out of points or miles when you redeem them with retailers, airlines and hotels that you frequently patronize: Use a co-branded credit card. Co-branded cards, such as the Delta SkyMiles Gold American Express card ($150 annual fee, waived the first year) and the Amazon Visa and Prime Visa cards, often offer the best rates when you use rewards to make purchases from the corresponding brand.
Another way you can earn extra rewards and score discounts is by shopping through your credit card’s online portal, which may offer everything from beauty products and electronics to travel-related purchases. Keep an eye out for notifications about special offers and promotions through which you can get additional benefits during a certain period, such as the holiday season. In general, you’ll have to opt in for these deals.
While it’s easy to get caught up in the excitement of maximizing rewards, it’s also critical to make decisions based on your needs and desires. “Consider your financial goals,” Hernandez says. Do you want cash back to use on gifts? Are you aiming to earn enough miles for a free flight to your friend’s New Year’s Eve extravaganza? Or do you desire enough points for a free night at a hotel, so you have somewhere to stay when attending family get-togethers? These decisions should all factor into which cards you choose to prioritize.
Access exclusive experiences and events
Certain credit cards can grant you early, exclusive and even free entry to a wide range of experiences, from concerts and music festivals to theater performances, museums and sporting events.
For instance, holders of Capital One Visa and Mastercard credit and debit cards were able to access an allocation of presale tickets for Taylor Swift’s The Eras Tour. And Bank of America credit and debit card holders get free general admission during the first full weekend of every month to more than 225 U.S. cultural institutions, which include space and science museums, botanical gardens, and cultural centers.
In addition, your cards may snag you hard-to-get reservations at some of the world’s top restaurants, better seats on a flight, or access to more-convenient parking areas at events. You may also enjoy entry into airport and venue lounges that often have Wi-Fi, complimentary snacks, and free or discounted drinks. At hotels, you may get free breakfast, late check-out, and dining and spa credits. “It’s the whole champagne-travel-on-a-beer-budget kind of thing,” says Rossman.
If you’re planning to catch any shows, be sure to check out your card’s perks. For instance, Chase cardholders who plan to attend the Christmas Spectacular Starring the Radio City Rockettes in New York City can get preferred seating and 20% off food and nonalcoholic beverages.
You may even come across perks that benefit the kids. For instance, families who have the Disney Visa card can get special access to Disney and Star Wars characters at Walt Disney World.
And if the holidays are a time when you give back to others, your rewards can help there as well: Many credit card issuers allow you to exchange rewards for charitable donations.
Monitor and manage your rewards
Staying on top of your credit card rewards takes some effort, but you’ll make the most of what you have coming to you if you’re organized. For starters, make sure you know whether your rewards will expire. Most credit card programs don’t impose expiration dates on rewards you earn while your account remains in good standing. But there are exceptions, so check your card’s terms.
Along with staying on top of the cash back, points or miles you’ve earned, it’s important to track one-time or yearly perks such as a free night at a hotel, complimentary streaming-service subscriptions, or shopping credits at select retailers. Also monitor annual fee amounts and their renewal dates, and check your issuer’s policies on account inactivity if you rarely use a card; the issuer may lower your credit limit or close the card if you don’t use it much.
Many credit card issuers have apps and online dashboards where you can track rewards, view your benefits and activate offers. Third-party apps, such as those from AwardWallet, MaxRewards, CardPointers and The Points Guy, can help you to monitor your rewards, too.
For Hernandez’s part, she keeps tabs on her seven personal credit cards in a more traditional, hands-on way. “I track everything on a spreadsheet,” she says. This approach helps her stay on top of perks, annual fees and more. “I want to make sure I’m getting the most value out of my cards.”
Don't overlook these extras
Many credit cards offer even more perks and protections than you might realize. “Certain cards will give you everything from rental car insurance to trip cancellation and interruption protection to coverage for lost or delayed luggage,” says Ted Rossman, senior industry analyst for CreditCards.com and Bankrate. “Some airline cards will give you a free checked bag for each member of your family when you travel, which can save you a ton of money.”
Here are some of the many benefits to check into:
- A credit to cover the cost of an application for TSA PreCheck, Global Entry or CLEAR Plus, all of which provide expedited security screening at the airport. If you already have these services or don’t need them, you can use the credit to pay for someone else’s application and still get reimbursed, says Daisy Hernandez, credit cards editor at The Points Guy, a website that provides tips and tools for managing rewards.
- Extended-warranty coverage and purchase protection, which provide a repair, replacement or reimbursement if eligible merchandise is damaged or stolen. These benefits, which usually provide coverage within a certain window of time, often apply to items such as TVs, appliances and cell phones. Note that you typically need to pay for the item with the credit card to get coverage. (In the case of your cell phone, you usually must pay the monthly bill with that card, and a deductible may apply if you have to replace the phone.)
- Limited roadside-assistance services, such as tire changes, jump starts and short-distance towing. These benefits vary, and fees may apply.
- Credit-score updates and identity theft protection, which may include monitoring of your credit reports for signs of fraudulent activity and assistance with recovery if you become an ID theft victim.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
