Photo Credit: Tomasz Piwowarek
Reward programs are not as contemporary & hip as you may think. Loyalty or reward programs have been a part of our consumer culture for quite some time. For instance, Canadian Tire started a rewards program back in the 1950’s with their ‘Cash Bonus Coupons’ or Canadian Tire Money featuring “Sandy McTire.”
While reward programs are extremely popular, and have been for decades now, most program members are not maximizing the benefits. Many of us are working to pay off our credit cards, instead of letting them work for us. So, how are you supposed to get the most out of credit card rewards programs?
The Right Card Is Crucial
To maximize your rewards, the first step is choosing the right card based on your spending habits and desired rewards.
Points Cards – Points based cards generally have the widest variety of redemption options available. For example, many points programs will allow you to redeem points for gift cards, merchandise, or special events. One potential downside is a relatively low points earn rate compared with other specialty rewards programs.
Specialty Rewards – Brand loyalty can be rewarding, and retailers love the exposure. Everything from NHL teams, movie theaters, and motorcycle companies are getting on board. These companies are also backing their cards with giveaways and other deals and promotions. Brand specific loyalty programs generally offer a higher earn rate than standard points reward cards.
Miles – If you’re a frequent traveler and have a bucket list full of exotic destinations, then you may want to consider a travel rewards card. The benefit for most people is knowing they’re building miles for a vacation or “rainy day”. Travel cards also provide additional travel related benefits that some may find attractive.
Cash Back – For many, cash is king, and when used for everyday purchases the cash rewards can really add up. Be sure to read the terms and conditions of the offer – some cards require a minimum spend limit to reach the top cash rewards rate. These cards work best for the “super user” who is trying to squeeze the most out of the rewards program.
One caveat that should be obvious, rewards programs are only good if you pay off your balance every month. The higher interest rates negate any benefit when carrying a balance.
Spending Habits
Pull out our bank and credit card statements. Where do you spend your money? Take a look at your “everyday” purchases like gas, groceries, and household items. A family of 4 will generally have a greater portion of their income going towards these types of purchases versus a bachelor. As your life changes, so too will your spending habits.
Look for a card with reward bonuses that match your spending habits. It’s possible to significantly increase your reward earnings by simply changing the way you spend. For example, some cards offer higher cash back for charging your recurring bills to the card. You’re going to spend the money anyway, you should get rewarded for it!
It can be difficult to think of using a credit card for all of your purchases, as people tend to associate frequent credit card use with irresponsible spending. This can be true in some cases, but the key is to monitor your spending and constantly track your purchases. Set a budget or use a helpful tool like LearnVest’s smartphone app to make sure you don’t go overboard.
Getting the most out of a credit card rewards program requires having the right card for your type of spending, using that card as your primary source of payment and constantly monitoring your account to ensure you don’t overspend. By following these steps, you can become a savvy user that has a credit card working for you, not the other way around.
