3 rewards credit card mistakes to avoid

Written by
Curtis Arnold
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Reward credit cards continue to grow in popularity, and current economic circumstances, including soaring inflation, could have something to do with it.

A new Ipsos poll, conducted last June on behalf of Wells Fargo, found that 90% of adults who have a rewards credit card consider these rewards to be important.

Additionally, the study found that half of adults with a credit card agree they are relying more on credit card rewards to offset the cost of everyday purchases because of rising inflation.

So how can you better leverage the rewards your card offers in this environment?

These tips don’t directly have anything to do with the “earn rate.” Earn rate is simply the rebate percentage your card offers, such as the flat 2% cash back the CardNamediscontinued offers (1% when you buy, 1% when you pay), and it seems to be the main focus of most cardholders (Citi is a CardRatings advertiser). While arguably not as sexy as earn rates, ignoring the following tips could be costly and tank your overall rebate earnings (regardless of how high your earn rate is)!

Not being proactive with your rewards cards

Most reward cardholders operate in a reactive mode when it comes to using their card(s). In other words, they do little planning and have few, if any, strategies for using their cards wisely. Therefore, it’s unsurprising that just 31% of credit card customers feel their frequent purchases maximize their rewards earning, according to a recent J.D Power study.

The study notes that “as the economy tightens and new lending alternatives continue to emerge, it is an ideal time for consumers to reevaluate their current card choices to ensure alignment between spending and rewards/benefits.” It simple terms, shop around for a better rebate card if your current one isn’t aligned well with your spending habits.

Spending habits change from time to time depending on various factors, including how the economy is doing, getting married or divorced, starting a family, etc. If you haven’t shopped around in a year or so, it’s time to do so. You can start with the CardRatings best credit cards list.

The bottom line is that you should think proactively in order to maximize earnings from your rewards card. Fortunately, this doesn’t have to involve a ton of your time or energy. Sometimes simple, quick steps can be surprisingly effective.

“One of the best ways to stay proactive with your rewards is to take time to note the key benefits so you can access them quickly,” says Gerri Detweiler, a credit and small business expert and co-author of “Finance Your Own Business: Get on the Financing Fast Track.” “Some people use sticky notes, some use spreadsheets and there are a variety of apps that can help, too.

“When you check your credit card statement each month, also check your issuer’s reward portals and notifications,” Detweiler continues. “Many issuers will offer bonus rewards for specific purchases, but you need to activate them.”


One real-life example of what Detweiler is suggesting is something I do with my CardNamediscontinued card on a quarterly basis and that only takes me about 30 seconds (and is just as quick with other card issuers). I simply click a link in an email from Discover every quarter to opt-in to their quarterly 5% cash-back categories.

With this card, you earn 5% cash back on up to $1,500 spent in categories that rotate quarterly, but you have to opt-in order to qualify.

Overspending on your rewards card

A dirty little secret of the card industry is that credit cards, particularly reward cards, are carefully designed to make us spend more than we would if using a dnon-rewards credit card or cash.

Various studies show this to be true. One study conducted by Dun & Bradstreet, for example, found that consumers spend 12%-18% more when using credit cards instead of cash.

Given such stats, the obvious question is, “Is it possible to guard against the temptation to overspend?” Similarly, is it possible to stick to your monthly budget or spending plan when using a reward card?

The short answer is “Yes!” to both questions. Awareness of this temptation and simple strategies can lay the groundwork for success and mean you reap all the benefits of credit cards – lucrative rewards included – without the costs.

“Pay as many of your monthly bills as you can with your rewards card,” suggests Andrea Norris-McKnight, the editor of The Dollar Stretcherand After 50 Finances. “If you’re already earning a bunch of points each month for expenses you have to pay, you may not be as tempted to put non-essentials on the card by convincing yourself that the points make these purchases a good deal.

“Also, keep reminding yourself that those rewards points typically aren’t going to offset any interest you’ll pay on a balance you can’t pay in full each month,” Norris McKnight continues. “Some cards have some excellent rewards programs, but few will pay you enough to offset a 17% to 24% interest rate.”

Detweiler offers a more complicated approach, but one that seems to have a lot of merit if you’re tempted to overspend.

“One option is to set aside a specific amount for credit card spending,” Detweiler says. “Many financial institutions allow you to create subaccounts on your bank account that you can use for specific goals. You can have a specific amount of your monthly income go into that account to cover card purchases.

“Each week you can get online and pay for that week’s purchases,” Detweiler explains. “Then stop using the card once you’ve spent the budgeted amount for the month. If you find yourself overspending on a rewards card and you’re running up balances you can’t pay in full, than a rewards card is probably not your best choice.”

Whatever approach you use, the key is to make sure you’re watching your daily spending carefully and not blowing your budget. Furthermore, despite what you may have heard, paying your card off every month does not necessarily mean that you’re using your card wisely. Instead, paying off your card every month AND sticking to your budget in the process should be the goal.


There are a lot of personal finance apps, such as Mint, that can be particularly helpful if you trying to start or implement a budget. The best part is that many of these apps are free (premium features may have a fee).

Not redeeming your rewards well

We all love to “cash in” accrued rewards whether in the form of travel, gift cards, cash, statement credits (a personal preference), etc. While it should be fun, redeeming rewards can, unfortunately, be a confusing and frustrating experience.

 by her clients, has a personal horror story that conveys the frustration of many consumers.

“I learned this the hard way the first time I signed up for a United Airlines card (back when it was Continental),” explains Lynnette Khalfani-Cox, author of the New York Times bestseller “Zero Debt: The Ultimate Guide to Financial Freedom” and affectionally known as the Money Coach. “I thought I was basically going to get 50% off flights for my husband and myself to Europe. But once I tried to book (and then read the fine print), I discovered I would’ve had to pay for one “full fare” business class ticket… at a cost of $8,800 each!

“For coach tickets, airline cards can also require you to buy a “non-refundable” (translation: expensive) coach ticket – not a standard or discounted economy ticket, such as a basic economy ticket. So what seems like a good deal initially may turn out to be not such a bargain after all.”

The good news is that redeeming your hard-earned rewards doesn’t have to be a pain. In fact, redemption can be as easy (and fun) as eating pie.

Similarly, Lenny Freeman (named changed to protect her identity) has had problems in the past with redeeming rewards and began to question whether rebate cards were too much of a hassle.

Then, she discovered that the Apple Card helps cardholders streamline the redemption process. Her frustration quickly turned into “much better vibes.”

“The Apple Card allows me to do daily automatic redemption and it’s a much easier process than other cards I’ve used it the past,” she says. “It feels like I’m actually getting real value/rewards!”

Simple steps like turning on auto-redemption can save you time and help minimize the hassle factor, so check with your card issuer to see if they offer this benefit.

Interestingly enough, a Harris Poll survey commissioned by CardRatings.com, found that millennials do a better job utilizing auto redemption that any other age group. According to the survey, among those who have a rewards credit card, millennials are nearly twice as likely as those ages 45 and older, 27% vs. 14%, to say their rewards are automatically redeemed when they reach a certain level (for example, an automatic statement credit when cash-back rewards reach $25).

“Have a plan for using those points and always know how to get the most value for them,” Norris-McKnight emphasizes. “For instance, do you get more value for a statement credit or buying gift cards? Are your travel points worth more or less depending on how you book your flights or hotels? Those who fully understand their card’s rewards program can use it to their advantage to get the most value.”


It’s amazing the amount of reward points, miles, etc. that are never redeemed for various reasons. According to Synchrony Bank, 31% of credit cardholders didn’t redeem rewards in 2020.

“If you find yourself leaving unredeemed points in your account and you’re not putting them to good use, consider a cash back card with at least 2% back instead,” Detweiler says. “Everyone can use cash!”

I sincerely hope these insider tips are helpful to you and would love your feedback on how you’ve been able to use your favorite rewards card more effectively. Who knows, I may include a tip from you in a future article!

Looking for related tips? Be sure to read our article, Do credit card points expire?

Curtis Arnold
CardRatings Founder

Curtis founded Cardratings.com in 1998 and, in so doing, helped pioneer the concept of rating credit cards. He has been a nationally recognized expert in consumer credit for well over 20 years. He is the author of “How You Can Profit from Credit Cards: Using...Read more

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