Whether you’re new to credit card rewards or a seasoned pro, there are some basic guidelines to follow.
“Everyone makes errors,” as the phrase goes, and the points and miles game is no exception. Whether you’re new to the pastime or a seasoned veteran, there’s always the risk of making a mistake.
From this guide, you will be able to learn something and maybe avoid some basic mistakes made by cardholders.
1. You must pay the remaining debt in full.
One big mistake many people make is paying off debts in parts. Keeping a debt is a significant sin when it comes to credit cards. In the beginning, it would seem like you have it all under control, but trust us when we say that it will sneak around faster, and by the time you try to make a move, you will be in a challenging position. So never play with debts. Always make sure to pay it in full. Spending at will with no clear plan in place to pay down the debt. This activity will not only destroy your credit score (harm your ability to open new cards or acquire a mortgage or other loan in the future), but it will also cost you money.
Most rewards credit cards have high-interest rates — albeit a handful does for a limited time — so accumulating a balance and not paying it off each month would nullify the value of any points or miles you earn. So no matter how many credit cards you own, spend within your means so that you never land in a tight spot.
2. You must not fail to make a payment.
While not as awful as carrying a deficit, missing payments may be costly. For starters, most credit card companies impose a $25-$35 late fee if you make a payment even one day late.
Payments made beyond the due date might also harm your credit score. Your payment history accounts for more than a third of your overall credit score, and although one missed payment isn’t catastrophic, a string of them is.
Make use of the automatic payment options offered on almost all credit cards.
3. You must not cancel a card before starting a new one.
Owning many cards is not a problem. However, cancelling will do more harm than good if you own a few credit cards. The reason for this is.
Your credit usage ratio, or how much of your available credit you use, accounts for 30% of your credit score.
Your credit usage rate is just 10% if you have $5,000 in credit card debt and $50,000 in total credit available. However, when you cancel a card with a $30,000 limit, your interest rate goes to 25% (since your available credit is now just $20,000). That’s not exactly in the danger zone, but it’s high enough to raise some concerns among card issuers.
Two, another 10% of your credit score is determined by the duration of your credit history, including your accounts’ average age. So do not cancel a card with no annual charge if you’ve held it for five years or more. Instead, make a few purchases on it each year to keep it from being closed by the bank, and it will continue to contribute to your credit history.
Simply said, don’t terminate a credit card unless it won’t impact your credit usage rate. For example, if the card includes an annual cost that you want to prevent, consider downgrading it to a no-annual-fee version instead of withdrawing it.
4. You must not cancel a card. Otherwise, you will lose your points and miles.
Another disadvantage of cancelling a credit card is that you’ll lose any points or miles you’ve accrued.
Many credit cards linked to a specific airline or hotel chain don’t have this problem since the earned points are instantly deposited into your account with that program. Other points and miles, such as American Express Membership Rewards points and Chase Ultimate Rewards points, remain with the card issuer until you redeem them.
If you cancel a card containing these sorts of incentives, make sure you redeem them before closing your account.
Also, before withdrawing the card, please use the points by transferring them to a friend or saving them for travel or statement credits.
5. You must not let your rewards lapse.
Though specific loyalty programs (including JetBlue, Delta, and United) do not have a termination date for prizes, others will delete your account after a particular amount of idleness.
This time frame is usually at least 18 months, although it can be shorter (or longer during the pandemic).
6. You must not pass up a welcome freebie.
Using a rewards card or a travel card for everyday purchases is a terrific way to enhance your earnings throughout the year. Still, the sign-up bonus is one of the most critical factors driving credit card applications.
If you don’t spend enough time within the designated time limit (usually three to six months). So when it comes to these needs, bear the following in mind:
When your application is granted, the clock starts typically ticking: The time limit for claiming the bonus usually does not begin when you receive the card but rather when your account is approved. If you’re unsure, contact your card’s customer support and inquire.
Annual fees, transferred balances, and cash advances are not included in the calculation: For example, if you took advantage of American Express’s newest offer for The Platinum Card®, the $695 annual charge (see rates and fees) will not help you meet the minimum spending requirement.
Knowing what counts and when it depends is half the fight, but you also need to keep track of your spending. Spreadsheets, calendar reminders, and financial management software may all help you keep organized.
7. Take advantage of the category incentives.
Many credit cards provide rewards for purchases made at certain retailers, such as restaurants, supermarkets, and petrol stations. However, I cringe when my acquaintance pays for dinner with a 1% cash-back card rather than the Chase Sapphire Preferred Card or Chase Sapphire Reserve, which offers extra Chase Ultimate Rewards points on dining expenditures.
If you have a credit card with bonus categories, make sure you utilize it to purchase those areas.
An excellent initial step is to read the card agreement (or go to the card’s website) to learn about the earning and perks offered by your present cards. If you’re looking for a new card for a particular spending category, you can also look at our guide to the best cards for each bonus category.
8. You must not disregard cards with yearly fees.
You might think that annual fee cards are
wrong if you’re new to this activity.
On the other hand, many of these cards include attractive sign-up incentives, continuing benefits, and anniversary bonuses that more than make up for the annual charge. Furthermore, many of them waive the yearly payment for the first year, providing you a risk-free year before deciding whether or not to maintain the card in the long run.
9. You must go after retention incentives.
There are still methods to avoid the annual charge if you’ve taken the leap and opened a card with one.
If you don’t believe the value you’ve gained from the card warrants the yearly cost, you may always phone your card issuer and request a waiver when the fee is due.
Remember that the issuing bank wants you as a client. Therefore closing your account is not an option.
When the annual charge is due, call the number on the back of your card and inform them you’d like to cancel the card owing to the yearly cost. After that, wait and see what occurs.
Some people have reported that they have been given certain offers like
- A yearly fee that is waived (no strings attached).
- Make X purchases in Y months, and the yearly charge is eliminated.
- If you spend X dollars in Y months, you’ll get Z bonus points or miles.
- Z miles or bonus points (no strings attached).
10. Foreign transaction fees are not to be paid.
Many credit cards charge you a fee for every purchase you make in a foreign currency or nation (usually 1% to 3%). This includes purchases made outside of the United States. This can convert to dollars for you by the vendor (which you should never accept, by the way).Some credit cards, however, waive these costs. For example, there are no international transaction fees on several premium travel rewards credit cards. In addition, foreign transaction fees are waived on some no-annual-fee cards, such as the Capital One VentureOne Rewards Credit Card.
This one is straightforward: Obtain a card that exempts you from these charges.
There are several things you must and must not do with your travel rewards credit cards. So whether you’re searching for the most excellent cash-back credit cards or a premium travel rewards card, maybe this list of commandments has given you some food for thought.
When you’re ready to start travelling again, utilizing your points, miles, or cash back to plan a great vacation will make you happy. However, it is essential to make the most of each card you receive and utilize it frequently.