Using credit cards that earn rewards is a smart financial move. If you use credit cards to pay for your everyday purchases, you should earn a reward when you swipe them. However, it’s critical to make sure you don’t make costly mistakes when managing and using the rewards you earn.
Below are some credit card rewards mistakes that could cost you money.
1. Accumulate credit card rewards
Do you have a growing collection of credit card points or miles that you haven’t redeemed yet? It’s best to use your rewards as soon as possible. Dear reader, I’m guilty of making this mistake too. Let me explain why you shouldn’t hoard your points.
Rewards programs can change. Similar to how food prices increase over time, redemption requirements can increase. You may only need 30,000 points to book a one-way flight on your preferred airline today, but that amount could increase to 40,000 points in a few months.
Accumulating points can be risky because they can lose value over time. It’s even more important to prioritize using points if you pay an annual fee for your card. If you let them sit for months or years, you’ll pay an annual fee for points you’re not using.
2. Transfer your points to a travel partner without checking availability
Some travel credit cards allow cardholders to transfer their points to select travel partners. By transferring your rewards to airline and hotel partners, you can book award flights and hotel stays, which could save you money on vacation costs.
But be sure to research availability first. Once you transfer your points to a partner, you can’t transfer them back to your credit card’s rewards program. That means it’s essential to research your options and plan how you’ll use your rewards before you make a transfer.
This is especially important for award flights. You may see a flight available on the airline’s website. However, airlines offer limited award flight tickets, so the flight you want may not be available to book with points or miles and may only be available to those paying with cash.
The best strategy is to create an account with the airline’s rewards program and check for award flight availability before transferring your rewards. This way, you’ll be able to get the flight you want.
3. How to redeem your rewards for cash back
Many rewards credit card programs offer cardholders a variety of ways to redeem their rewards. Cash back or a statement credit is often the easiest way to use rewards.
But you may want to explore whether this is the best strategy for maximizing the value of your rewards. For example, some travel rewards credit cards allow travelers to transfer their rewards to travel partners. You may find that you can get much more value from your rewards this way.
Here is an example: I recently redeemed 100,000 credit card points for a round-trip business class flight, which normally costs $3,448. Instead, I paid $168 in taxes and fees. If I had redeemed my 100,000 points for cash, I would have only received $1,000. By being selective about how I redeemed my credit card rewards, I got three times their value.
If cash back is the best option for you, go for it. But consider all the ways you can use the rewards you’ve earned to choose the redemption method that best suits your needs.
4. Forgetting to research award flight taxes and fees
Research all costs before redeeming your credit card rewards for an award flight. You’ll likely be required to use a certain amount of points or miles to book your ticket, but you’re responsible for paying any taxes and ticket fees.
For some airlines and routes, these costs are high. Researching the taxes and fees for a particular award flight before booking could save you frustration and money.
Maximize the value of your credit card rewards
Whether you use one of the best cash back credit cards or a travel credit card, take advantage of opportunities to get more value from your rewards. You can do this by taking extra care in managing and redeeming your credit card rewards.
If you’re not already earning credit card rewards, you’re missing out. When you use your credit cards to pay for everyday purchases, you can earn points, miles, or cash back that can help you save money.
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