You’re a pro: If there were a prize for smartest consumer, you’d get it. If there were a medal for best mom, you’d already have it. And if there were a dead simple way to make yourself more effective at both roles, you’d be all over it.
You probably sense where we’re going with this: There is.
Credit and debit cards that offer points, miles and rewards help your money pull double-duty, providing extra support for your family without any extra effort.
Today, we’ll show you some of the best techniques to make sure you’re getting the most from these rewards programs–and not falling into any hidden traps.
These six rules will ensure you aren’t leaving money on the table.
1. Check Your Credit Score
Before you sign up for a rewards card, make sure it’s good for your credit situation. Just applying for a credit card can ding your credit score because the company opens an inquiry into your credit history. Although a stray inquiry here and there isn’t such a big deal, racking up a bunch can hurt your credit, and if you’re at a point in life where your credit really matters, like if you’re applying for a mortgage or a car loan, each one matters.
Do You Use Credit Cards With Rewards?
If so, how do you make sure you aren’t leaving money on the table?
“Reward cards are often reserved for people with good credit, so if that’s not you, don’t apply,” says Gail Cunningham, Vice President of Membership at the National Foundation for Credit Counseling. Also, make sure the card works for your family. “Know which type of reward best fits you, your goals and your spending habits,” she says.
It’s always a good idea to keep tabs on your credit score; you can check it for free at creditkarma.com.
2. Pay Up Each Month
It’s best to maintain zero balances for all credit cards, but having no balance is especially important for reward cards. “Credit cards with rewards usually have a higher annual percentage rate (APR) , so they are better suited for families who pay off their credit card in full each month,” says Charles Tran, founder of CreditDonkey. When you carry a balance, a reward card is usually not as rewarding. “An interest rate that racks up hundreds of dollars a year cancels out any possible gains from the rewards.” If your family tends to carry a balance, he recommends looking at low interest credit cards rather than reward cards.
3. Don’t Overspend to Rack Up Points
“With a reward card, that little voice in your head starts convincing you that you’re actually earning more by spending more, and before you know it, you’ve racked up a balance you can’t handle,” says Cunningham. To win at the reward card game, a good rule of thumb is to forget about your rewards until it’s time to reap them. So, spend exactly the same way you would otherwise, without putting more on your card “for the rewards.” The rewards are a perk, not an end in their own right.
4. Read the Fine Print
As with any binding contract, it’s important to read the fine print before you sign on the dotted line. Some cards have limits on the types of purchases that earn rewards, how much you can earn, when the earnings kick in and when you can redeem them. For instance, a card that offers 5% cash back on gas may sound like a winner until you discover you aren’t eligible for the 5% rate until after you spend the first $1,000 in gas purchases. Taking the time to read and understand the credit card conditions can save a lot of future headaches (and money).
5. Do Your Homework
Before you sign up for a rewards card, comparison shop. “Just like the same brand of ketchup could be offered at different supermarkets in different sizes and prices, credit card offers vary depending on where you’re looking,” Tran says. If you’re in the market for a new card, one place to start is to check your mailbox–that said, while some offers in the mail are great, don’t assume they’re the best offers, and do your own your research. Check your bank’s website and credit card comparison sites like Bankrate or CreditCards.com to get a better sense of all of the offers out there.
No matter where you find the card you’re interested in, check for that same card on a few different websites, like comparing the offer as it appears on a credit card comparison site to how it appears on the site directly from the issuer. A card may give 1,000 bonus points if you sign up on one site, and 1,500 on another. Research may pay off!
6. Spend Your Points Wisely
Redeeming points often entails shopping online through your credit card company to find items that “cost” a certain number of points. But, it’s often possible to redeem your points for a plain old gift card instead. Credit card companies aren’t in the business of discounting merchandise, so see if you can get gift cards as an alternative, recommends Deana Arnett, senior planning consultant at Financial Planning Services in Northern Virginia.
For example, say you have 200,000 reward points to redeem, and your options are a flat screen TV that costs 200,000 points or a $2,000 Visa gift card. You’d be better off getting the gift card and buying the same TV cheaper at a place like Target, she says. (Then you can use the extra money for other purchases or add it to your savings!)