People love credit cards that earns good points and miles. They always look for cards with big sign-up bonuses and attractive annual benefits. But most of the time, people feel that these rewards cards are unworthy, when at the end of the year they tally up their finances.
If you often travel with your credit cards, you should use a rewards card every time.
But if you’re planning for a tour just because you can’t resist the mentality of collecting points, then you might be addicted to using one or more reward cards which will actually cost you more money.
To be on the safer side and protect your finances, make sure you avoid these mistakes with reward credit cards:
1. Missing the “minimum spend” criteria for sign-up-bonuses
Most of the rewards credit cards come up with a catchy sign-up bonus that requires a minimum amount to be spent by you.
The maximum time limit for the transactions varies between the first 90 to 180 days of card membership.
Few cards have different criteria such as a certain amount for a single purchase. But in both cases, the minimum amount spend remains as high as $5,000 (for example - the American Express Platinum card) or more than that.
People who are too much ambitious about getting these initial bonuses, points or offers, are often drawn by the lucrative promises. But actually, most of them fail to meet the minimum criteria to become eligible for the offers. So, they never get the bonuses.
| **How to avoid such a mistake:
Make a proper plan as soon as you apply for a new rewards card. It’s better if you apply for a new card when you have a big expense nearby. The expenses may include home repairs, summer vacation trip, or back-to-school shopping. Make a note of your deadline to reach that minimum spend, ask the card issuer, and verify the date properly. |
2. Overspending to earn bonuses or miles
Earning credit card points is very interesting. We don’t just use our credit cards to purchase things we need; we also make payments for services with the plastic cards so that we can grow miles and points balances.
We swipe our cards more because we get 5x or more rewards during a quarter (for example - Chase Freedom and Discover it Cash Rewards), or we make payments online with surcharges rather than using cash payment option because we really want a good amount of points in our account.
But we are doing wrong. Yes, we tend to overspend and throw our budget plans out of the list when we focus on the rewards and not on the price tags.
| **How to avoid such a mistake:
Always watch how your credit card usage and earning points are changing your spending behavior. If you think your purchases are justified because you’re earning points, it might be the best to think why you’re using that rewards card. If you're avoiding taking out money from the ATM to pay for something, you probably shouldn’t use your reward card for buying things unnecessarily. |
So, if you want to avoid such mistakes with reward credit cards, think before you swipe or make online payments.
3. Not comparing card benefits with the annual fee
Usually, most of the good points-earning reward credit cards have an annual fee.
But, do you ever think how to compare the benefits that you are getting from the reward card with the money you actually pay to be a card-carrying member?
For example: Suppose you’re paying $500 a year for an airline credit card which comes with free access to a club lounge. But, every year year, you travel by air only two or three times. In this case, you’re the loser.
The benefit of free lounge access is worth if you travel at least 10 times a year by air. You’d be better off financially if you avoid that credit card and pay $50 for a lounge day pass every you travel; it’s cheaper.
On the other hand, if you’re using a hotel credit card that gives you one free night every year by just paying $49 annual fee, you can use the benefit every year by spending at a hotel that costs $400 per night; that’d be a great choice.
| **How to avoid such a mistake:
You can perform a personal annual fee checking of your cards. Don’t be overwhelmed by the benefits that sound too good to pass up without considering the card’s annual fee. Calculate and compare the value of the card’s benefits with the amount you are paying towards annual fee; trust me...it works. |
4. Earning but not using your points
One of the major mistakes the reward credit cards users make is never using their reward points and miles. Billions and billions of points and miles are getting wasted every year just because the credit card holders don’t use them.
Isn’t it weird that people work hard to earn card benefits, sometimes even overspend, but end up with such a waste of resources?
There are many reasons for which people waste their points and miles. You might be saving your miles for a yearly perfect trip, and avoid using those miles on some less valuable trip, or you might just want to show off to your friends that you’ve got a million points in your balance.
Most of the time the problem arises when airlines and hotels suddenly change the valuation of your points and miles. You might be thinking about buying a first-class ticket worth 70,000 points, but next month it might cost you 100,000 points.
Apart from that, some airline miles may get expired if you don’t make any activity in your account for a certain period. So, keep those things in your mind.
| **How to avoid such a mistake:
You can practice the “earn and burn” method used by the frequent flyers. Make sure you are using the points and miles you have in your account and prepare plans to earn more. By using your point and miles time to time, you can surely redeem your reward card benefits for the best experiences you can get. |