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3 Powerful Ways to Maximize Your Credit Card Rewards

by Jason on November 15, 2010

If you don’t pay off your credit cards in full each and every month, there’s no point in using them…

The credit card rewards and benefits won’t outweigh the finance charges.

However, if you’re the type of person that always pays your balances off in full, there’s some serious money to be made through their credit card rewards and cash back programs.

Below are three powerful tips for maximizing your credit card rewards.

Tip #1: Get a card that gives higher cash back on regular spending

When it comes to your regular purchases, most credit cards give rewards which equal out to be a 1% rebate. However there are a few on the market that give anywhere from 1.5% to 2% – unlimited – on all purchases.

The most famous is probably the American Express Blue Cash, but unfortunately the first $6,500 spent each calendar year doesn’t earn you 1.5%.

For that reason, my personal favorite is the Fidelity Retirement Rewards American Express. There’s no annual fee and you get a 2% rebate on all spending which is deposited into your Fidelity account, whether that’s a 529 college savings plan, an IRA, a brokerage account, etc.

Other options include the Capital One Venture card and Discover Escape card, both of which give you a 2% rebate which can be applied towards any travel purchase, but the drawback is they both charge a $60 annual fee.

Whatever the case, I strongly advise against settling for only 1% on your regular credit card purchases. There are plenty of credit card deals on the market that give higher than that, so you might as well take advantage of them.

Tip #2: Use different cards for different categories of spending

As we all know, with many cards, certain categories of spending earn higher rewards. If you’re crazy like me, you can have a whole collection of different cards to cover the broadest selection of categories.

However I actually don’t recommend that, because that means you will have a bunch of different bills to juggle every month! But in addition to your card for regular purchases that gives 1.5% to 2%, I do recommend one other card that gives higher rewards in the categories you spend the most.

Going back to the example of the AmEx Blue Cash, after $6,500 is spent in a calendar year, the card gives you 5% at gas, groceries, and drugstores – categories that most us would really benefit from.

So if you’re a big spender and can hit that $6.5k threshold fairly fast, that’s one card to definitely consider. For me personally, I’m a bachelor so I tend to eat out a lot. For that reason, I use the Citi Forward card and the Costco credit card, both of which give higher rebates on eating out.

However you can only get a Costco credit card if you have a membership there, so between the two, the Citi Forward card is probably the better choice. Then there are several cards that give 3% to 5% on office supplies, cell phone bills, and many other categories. The key is to figure out which categories you spend the most and then go find the card that would be best suited for those.

Tip #3: Use the credit card companies’ online shopping reward programs

Many of the major card issuers – like Discover, Citi, Chase, Bank of America, and others – have these programs that give cardmembers additional rewards when shopping online.

They all basically work the same way, but I’ll use Discover’s program as an example. Cardmembers simply login to their online account and from there you can click on the following:
ShopDiscover – Earn 5% to 20% Cashback Bonus just for making purchases at top retailers through our exclusive online shopping site.

As their description states, you can earn 5% to 20% extra in rewards when you enter the online retailer’s website through Discover’s shopping portal. Their program has around 200 popular retailers and service providers participating.

A couple weeks ago I needed to re-order my contacts, and by simply accessing 1800contacts.com through the ShopDiscover portal, I got an extra 10% cash back on my purchase.

Conclusion?

With a little strategy, it’s possible to get credit card rewards that average at least double what most people get. But as a reminder, please only use cash back credit cards if you pay your balances off in full. Remember, due to the confusing way a credit card grace period works, even carrying part of your balance for just 1 day past the due date can cost you almost a full month of interest… or more! The bottom line is it’s simply not worth earning 2% or 3% cash back if you can’t pay the charges in full.

This was a guest post from Michael, who writes about credit card deals on his site CreditCardForum.com, which is a message board and blog for all things related to credit cards. He is fanatical about not just credit card rewards, but saving money in general.

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