Making the Most of Your Credit Card Rewards

Using a credit card to earn rewards is pretty simple. Just use the card to buy things and you’ll get cash back or reward points from your credit card company.

Getting that free money of 5 percent or even more on every purchase is easy, but there are some things you should pay attention to if you want to get the most rewards possible.

Register for Bonus Categories

To get the most out of a cash-back credit card, look for a card that gives bonus rewards on certain purchases.

While 1 percent cash back is common on all purchases, some cards offer a 4 percent bonus for a total of 5 percent for buying from certain types of merchants. These can include restaurants, travel, grocery stores, gas stations, airfare or hotels.

The categories may change every quarter, with airline purchases earning 5 percent back for three months, then changing to movie theatre purchases for the next three months, for example. The category may even have a cash back limit.

To get in on these bonus categories, some cards require you to opt in each quarter and manually select which category you want to earn money back on. Some credit cards make it as simple as registering your card online, logging in to your account and clicking a button.

Use the Right Card for Bonuses

If you have a few credit cards, it can be difficult to juggle them and remember which card has which bonus for the purchase you’re making. With the bonus categories changing each quarter, it can be difficult to remember which card to use to get the most cash back from it.

Using a cash-back card that you thought had a bonus at gas stations but instead had a bonus at department stores can leave you with a lot less cash back than you thought you’d be earning.

Avoid an Annual Fee and Interest

Paying an annual fee on a rewards card is normal, but be aware of how much more money you’ll have to spend to earn enough cash back or rewards points to make up the difference between the fee and what a no-fee card charges.

If a cash-back credit card has an annual fee of $75, for example, and pays 5 percent cash back for grocery store purchases, it would require spending $1,500 to get that $75 fee back. That’s a lot of groceries to buy before getting money in your pocket.

Another area where cash rewards can be eaten up is by card holders who don’t pay off their balances in full each month or on time and pay interest on their credit card balance. People who pay interest each month are often charged a higher interest rate on their cash-back card than if they did the same thing on a credit card with no rewards.

If you regularly carry a balance on your credit card, look for a card with the lowest interest rate. Don’t look for one with rewards.