Credit card rewards programs have gotten better over time. Not only have the rewards, in some cases, become far richer, but the variety of awards is more diverse than ever. Whether you want free hotel rooms, airline miles, points that you can use for merchandise, or cash back on purchases, there is a card for you.
Used wisely, a rewards credit card can make a real dent in your budget. For example, suppose that you can get up to 2% off charges at grocery stores. If you and your family spend $500 per month at your local supermarket, or $6,000 a year, a 1% to 2% savings is $60 to $120. That's not a fortune, but it is enough to make the effort worthwhile.
Or, with gas prices on the rise, perhaps you would like to get a percent or two back on fueling your car. If it costs $40 to $50 to fill up your car and you multiple that by four or five fill-ups a month, you may be spending as much as $3,000 a year on gas. Earn 1% to 2%, or as much as $60, on those purchases and you'll get more than one fill-up a year free.
If you want to take advantage of a credit card rewards program, here are 5 tips to help you maximize your savings.
Don't carry a balance. Don't get a rewards card and then carry a balance. In that case, you are better off skipping the card entirely because chances are you will be offsetting most or all of your rewards savings with finance charges.
Do your homework and find the right card for you. Start by deciding what rewards you value the most. Then do some research to find the credit cards that offer the rewards you crave. Once you have identified the most promising cards, compare them based on annual fees, rewards schedules and limitations (such as limits on the total value of the rewards that you can receive in a year), credit line and so on to identify the best one for you.
If you already have a credit card, find out if your credit card company offers a rewards card that meets your needs. Many offer multiple cards with different rewards and, based on my experience, you may be able to switch your existing credit card to a rewards program with the same company without going through the hassle of filling out and submitting a new application.
Avoid annual fees if possible. Many rewards credit cards come with an annual fee, but there are some no-fee cards for qualified applicants. If you can't find or get approval for a no-fee card, do some analysis to determine whether the card will really save you money. Estimate how much you expect to save from the rewards program in the first year, based on your past spending habits, and compare this to the annual fee. If the estimated savings are substantially higher than the fee, the card makes sense. Otherwise, take a pass.
Don't let rewards drive spending. While getting rewards back on purchases is great, don't let the lure of rewards entice you to make unnecessary purchases. Obviously, it is counterproductive to spend more than you need to just to get a percentage or two back. Before making a discretionary purchase, ask yourself the question: if I saw this item on sale at 2% off, would I buy it? If not, don't.
More from this Contributor:
http://www.associatedcontent.com/article/7902349/five_ways_to_cut_household_spending.html?cat=3, Five Ways to Cut Household Spending without Putting Out a Cent
http://www.associatedcontent.com/article/7802936/credit_cards_reasons_to_eliminate_reasons.html?cat=3, Credit Cards: Reasons to Eliminate, Reasons to Keep
http://finance.yahoo.com/news/First-Person-What-Know-About-ac-917628186.html?x=0, First Person: What to Know about Secured Credit Cards
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