3 Simple Steps to Maximize Your Credit Card Rewards

by Kevin on May 31, 2012

How many credit cards do you have?

Are you type of person that carries one card for grocery rewards, one for flights, one for hotels, and so on?

Or do you consolidate down to one or two main cards and just try to rack up as many cash back dollars, reward miles, or bonus points as possible?

Personally speaking I hold two major cards: an AMEX Blue Cash (with the old school 5% tier after $6,500 in spending) and an Amazon Visa from a long, long time ago. I find the concept of having 6 different cards for 6 different spending categories a bit overwhelming. Tracking all of those items on my already extensive budget spreadsheet is too much for me.

What about you?

3 Steps to Maximizing Your Credit Card Rewards

Here are the three steps I’ve come up with to maximize my credit card rewards regardless of how many cards I have.

1. Pick the Number of Cards You Can Manage

First, you must know yourself. What are you comfortable managing? If you can handle having a different card for every situation (and enjoy sitting on a huge wallet, at least for men), then get as many cards as you like. Just make sure you set them all up on automatic payment. The last thing you want to experience is a late fee in the name of maximizing your rewards.

2.  Use the Cards for Their Purposes

Going to the grocery store? Make sure to use the grocery rewards card. Booking a vacation? Use your miles card for the flight and your hotel card for the stay. When you get there, use your card that gives the most points for restaurant use as well.

The easiest way to not maximize your points is to use the wrong card in the wrong situation, repeatedly. That’s why, for me, having only a few cards is easier. I don’t want to have to carry around a bunch of cards and remember which one gives which rewards.

3. Don’t Use Reward Points for Discounts

Here’s the biggest one for me: once you’ve earned your rewards (whether cash, points, miles, or hotel nights), don’t use the points for a discount off of your next purchase. For example, with my Amazon Visa I can 3 points for every dollar spent at Amazon. I can redeem 5,000 points for a $50 gift card to Amazon, a gas station, or a hotel. But if I take those options I’m limiting the number of points I can earn on that next purchase. It would be better to pay “full price” for the tank of gas to earn the maximum reward points off of that purchase than to get a $50 discount on the purchase.

So instead of taking reward points to Amazon (where they can be applied directly during checkout) or to gift cards, I always get statement credits or checks sent to me. I then deposit that money and can use it however I like — even for the same purpose of buying gas. But instead of earning nothing for my $50 purchase, I can earn additional points or cash back. It’s a small thing, but over a long period of time you can rack up a lot of extra rewards just by taking the cash.

Does This Always Work?

I love taking straight cash back on my cards, but it doesn’t always work. Here are a few programs you wouldn’t want to get cash from:

  • If you can’t get a 1% cash back ratio. If it costs you 8,000 points to get $60 in cash back ($0.0075 dollars per point) you are better off finding another use for the points. You’re targeting a bare minimum of $0.01 dollars per point.
  • If you get significantly better returns from using the points elsewhere. For example, you can turn 50,000 Southwest Rapid Reward points into $500 in gift cards. But those same points might be used to buy $625 in airfare. That’s an extra $125 in rewards — even if you used another credit card on the purchase, you wouldn’t generate an extra $125 in rewards so using the points for their intended purpose makes sense.

How do you typically use your reward points? As needs come up or do you plan it out?


Sun May 31, 2012 at 10:43 am

If you have a 5% cash back on office supply store purchases, you can also buy gift credit cards through an online rebate. BigCrumbs, Chase Ultimate Rewards, TopCashBack, etc. You can use those gift cards to purchase other items.

For my day to day, I use a Sallie Mae 2% cash back card. The issue with having different cards for different merchant categories is that the threshold involved to redeem can be quite high. If the minimum to redeem is 5,000 points @ 1% would require $5,000 of spend. I rather focus my spending on a single card and hit the redemption tier more often.

The other way to “maximize” rewards spend, is to look for opportunities where cash provides the greater discount than credit card. The savings are instant and you don’t have to hit a redemption tier. For example, for our wedding flowers… We were able to negotiate a $400 discount by offering cash instead of paying with credit card.

Payment protection insurance June 2, 2012 at 10:25 pm

I personally just use two cards, one I use for everyday expenditures and one I use for traveling as my needs are not really demanding and I usually prefer to pay using money I have. I wouldn’t recommend more than one card if someone’s needs do not demand it. For someone who travels quite frequently I would highly recommend getting a card specifically for traveling as it is easier to track expenses and to check for fraud that way.

Andrea July 26, 2012 at 10:32 am

Fantastic topic.. It’s generally accepted that you can pad your annual income a bit by using rewards credit cards — as long as you use them correctly (no extra purchases, pay off cards every month, and so on.) Personally, I agree with this philosophy and have been using cards that give cash or gift cards back as rewards for years now, netting several hundred dollars in extra money annually for doing nothing other than changing my form of payment.

By having a multi-card strategy it’s reasonable today to earn an overall return of roughly 3% per year.
Andrea Jones

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