Mastering Credit Card Rewards
I got my first credit card at the age of 23 after years of hesitation caused by a fear I'd spend myself into debt. Then my dad pointed out that using a card wisely by not overspending and paying off the balance in full each month could work to my advantage.
For one thing, he told me, it could help me build a good credit history, which I'd need if I wanted to take out a bank loan or mortgage. He also pointed out that it could come in handy when travelling, particularly in places where it may be unwise to carry large sums of cash. And finally, a credit card could help in taking advantage of a good deal ahead of the next payday.
These days, with so many credit cards offering rewards, there are even more ways to let them work to your advantage. But it's still good to use them wisely, because the thought of getting rewards can tempt us to spend more. Mastering the art of credit card rewards comes down to two things: Choosing the card that best fits your needs and not spending more than you can afford.
The choices can be overwhelming. There are credit cards offering gift cards, cash back, travel miles, gas purchases, investment products, merchandise, charitable contributions, and even payback points on outstanding debt balances.
Despite these various shapes and sizes, rewards cards tend to fall into three basic categories: Cash, miles and points. When choosing your card, think of which of these three categories best fits your needs and go from there. There's likely no sense in getting a travel rewards card if you don't travel. On the other hand, a card offering cash rewards that can be put into your savings might be just the thing.
Online resources such as CreditWalk.ca have selector tools that let you compare the rewards, rates and terms and conditions to help you find the best deal. Many cards offer an array of rewards and flexible options so you're not locked into one type if you change your mind about what you want later on.
It's important to check the fine print because some rewards points expire, come to term or roll over, so you want to make sure you're not building up rewards you can't use. Some cash-back cards require you to spend a certain amount within a certain time period to be eligible for the cash or are only eligible with certain participating retailers. Others have strict rules and penalties on late payments or overextended balances, and some will allow you to join only if you have an excellent credit history. Among the things to look for are generous rewards and no annual fee.
Simply put, the sooner you round up enough points, miles or cash-back credits, the sooner you get your stuff. To earn more rewards faster, consider whether the company offers bonus points for signing up and what kind of cash-back returns you might expect going forward. Also look at which card offers the most reward points per dollar spent.
Another way to fast track your points is to purchase big-ticket items you've already budgeted for with your credit card. While there's no rule for how many rewards cards to get, you'll probably rack up points faster using one or two, rather than with five or six.
Provided you choose a card that's right for your needs, stay within your budget and pay off your balance in full by the due date, a rewards credit card can be a handy financial management tool.
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