When I applied for my first credit card I was in college, away from home, and my parents thought it would be a good idea that I had plastic in case of an emergency. The card I applied for was a Bank of America Cash Rewards Visa Signature, a long and fancy name for a credit card that offered rewards for swiping my plastic at the grocery store and gas station.
The 2014 version of this credit card offers the following benefits:
- $100 cash rewards bonus after you spend at least $500 on purchases within the first 90 days of opening an account
- 1 percent cash back on purchases everywhere, every time
- 2 percent at grocery stores and 3 percent on gas for the first $1,500 in combined grocery store and gas purchases each quarter
- Bank of America customers get an ongoing 10 percent customer bonus each time you redeem cash back into a Bank of America checking or savings account
- 0 percent Introductory APR for 12 billing cycles for purchases and for any balance transfers made in the first 60 days, then, 12.99-22.99 percent variable APR
- No annual fee
- Rewards do not expire
Did I take advantage of any of those benefits? Not really. Like many other young, naive 20-something-year-olds, I didn’t know much about personal finance. I knew the card was for emergencies (and buying groceries, shopping at Target, and eating out were “emergencies” to me back then) and I knew that eventually my introductory APR would expire. But I didn’t know anything about the many rewards I had been — and could be — collecting. Sadly, I’m not alone.
In its seventh annual U.S. Credit Card Satisfaction Study, J.D. Power found that customer awareness of earning and redeeming rewards with their credit card has declined year over year with 59 percent of customers saying they “completely” understand how to earn rewards in 2013, compared with 66 percent in 2012. Even worse, 33 percent of customers indicate they are unaware of the benefits associated with their card.
“Customers who use their card’s benefits spend an average of $400 more per month on their card, compared with those who are aware of benefits but do not use them, so clearly this is an area of importance to card issuers,” said Jim Miller, senior director of banking services at J.D. Power. “While most customers change cards for a better rewards program, they often don’t fully understand the rewards offered with their current card. There is a clear opportunity for issuers to better communicate rewards programs and benefits to not only keep customers loyal, but also to attract new customers.”
Don’t stay in the dark about the rewards your credit card offers! If you’ve got a credit card already, find out if there are any rewards associated with it. Many credit cards offer rewards programs in the form of points, cash back or rebates. However, these cards might also come with high fees. Whatever you do, make sure the rewards you rack up justify the fees you’re charged to carry the card.
To take full advantage of the rewards having a credit card offers you, follow these tips:
I signed up for my bank’s credit card mainly because, well, it was easy. If I were to do everything all over again, I would research for the card that best fits my lifestyle. While rewards are certainly something you want to consider, they aren’t the be-all and end-all of choosing the best credit card. Consider your spending habits, how much interest you’ll have to pay eventually, limits to the card, fees and penalties you might be forced to pay, and the incentives to sign up. Fancy rewards like earning cash back should be considered nice benefits for getting the credit card, but not the determining factor.
2. Know the rules
Many rewards programs come with various restrictions and limits. Some might require you to spend a certain amount of money before you can earn rewards, others might have an expiration date tied to the points you accumulate. Rewards programs can — and do — change their terms all the time. Some programs can be incredibly complex to cash in on your rewards, so take the time to look at all the terms and conditions of the card you’re signing up for. If I had known the rules associated with my credit card, I would have used it more when purchasing groceries or gas to take advantage of the cash back rewards. Also, be sure to pay attention if you receive notifications that your credit card is changing its terms and conditions. I was definitely guilty of carelessly browsing through notices from my credit card company, but a change in rewards could have had a significant impact on my payments or spending habits.
3. Choose the right rewards
The main draw for the credit card I signed up for was its cash back rewards. But since I didn’t know how to take advantage of the cash back rewards, I probably lost out on a significant amount of money. Since I love to travel, I might have considered getting a travel rewards card instead to earn points or miles. If you are looking to budget and not swipe your plastic on frivolous items or products, you might want to consider a card that earns you points for doing things like shopping at a grocery store or filling up your gas tank. Bottom line: don’t pick a card that has rewards you aren’t going to use.
4. Spend on one card
If you’ve got multiple credit cards — hopefully you’re not racking up unnecessary debt. That said, if one card has rewards tied to its use at grocery stores or gas stations, you should use that card whenever possible at those outlets to get the maximum value out of it. You don’t want to necessarily swipe everything on the card (remember, interest will have to be paid eventually), but if you plan to charge your expenses anyway make sure you use the card that comes with the rewards.
I didn’t have multiple credit cards, so I didn’t have to worry about spending on one, but if I had known that using it at a grocery store would earn me cash, I might have been more apt to swipe while shopping for vegetables and fruit.
5. Take advantage of bonuses
Some credit card companies offer bonuses through their websites for things like shopping through their rewards mall. Others might offer opportunities to double or triple your earning rewards by increasing cash-back offers during certain seasons. During the summer, for instance, some issuers might reward you more for gas purchases you make because it’s a busy time for drivers.
It might also be worth your time exploring your card’s website to find out what is offered online. After discovering the many rewards associated with my credit card, I found that they had a shopping portal where I could have earned rewards. Also, download your credit card’s mobile app because your issuer could offer special promotions there.
6. You snooze you lose
If your rewards or miles or cash back offers expire, they won’t really do you any good. I hate to think about the rewards I lost out on because I let them expire. Don’t let that happen to you.