Collecting rewards points isn’t just a great way to get free perks; it also makes shopping a little more fun. It becomes like a game, really, as you rack up points for every purchase you make, inching you a little closer to that free vacation or cash back rewards. Unfortunately, this game can quickly get out of hand if you’re not careful, possibly resulting in a poor credit rating.
Be Picky About the Card You Choose
Before picking a card, research several programs to see which offers the best deals for you. Find out how many points you earn on purchases and how many points you need to redeem them for something you really want.
Tip: Concentrate your efforts on one rewards program at a time. Every time you apply for a new credit card a hard inquiry is generated, which could impact your credit scores, so don’t apply for several cards all at once.
Look for the Perks That Really Matter
Compare the rewards you get from different cards and different stores and zero in on the ones that mean the most to you. For example, if you have a long commute, a card that lets you redeem points for free gas may wind up saving you a lot of money at the end of the month.
Tip: Provided you keep a zero balance, having a store credit card likely won’t have a negative effect on your credit score. In fact, store credit cards can be easier to get for those with a lower credit rating.
Compare the Real Costs
There are few things you can get with reward points that you can’t buy with cash. Find out the real value of what you want to get, and then compare this to what it will cost you to save enough points. If you don’t think you can pay off your purchases at the end of each month, subtract the interest fees you’ll be paying from the real value of the item.
Tip: Carrying a small balance on your card won’t hurt your credit rating, but it will cost you in interest. If you pay your balance to zero every month, you won’t incur any interest costs at all.
Go Big or Go Home
Once you select a rewards program, sign up for everything — the email newsletter, the home mailing list, and become a fan of the program’s social media space. This is how you find out about special deals, like double-point days, and get coupons for special offers for additional points.
Tip: Some rewards programs may give you an incentive for signing up for a new credit card. Make sure that you read the fine print. If the new card has an annual fee that your current card doesn’t, it may cost you more than it’s worth.
Don’t Reward Yourself With Debt
Interest rates and late payment penalties can really take a bite out of any savings when you redeem your reward points. If money is tight, buying things you really don’t need in order to get something with the points is not going to help your finances or your credit rating.
Tip: If you do find yourself short at the end of the month, make any payment you can, then put your card away until you get caught up. It’s better to make a small payment, even below the minimum, than to skip a credit card payment.