For most people, credit card reward points provide a much-needed perk to regular credit card usage. When you know you are earning credit card reward points for your purchases, it can soften the blow of those larger expenses. Once you have collected a substantial amount of points, you probably wonder whether it’s wise to cash them in now — or keep saving for a better reward. Of course, you don’t want to wait too long, or your points might expire. The way that you use your points can be just as important as how you earn them. As you weigh your options, check out our helpful advice for deciding how to capitalize on your credit card rewards points.
When to Save Points
If your credit card offers big-ticket incentives for accumulating a certain amount of points, it makes financial sense to stockpile the rewards. Generally, these types of cards favor the travel-oriented consumer, who’s looking to earn points toward airline miles or hotel stays. In the end, your efforts could net you a free — or significantly discounted — vacation that might normally cost thousands of dollars. But some cards set eligibility restrictions for these points, so make sure you read the terms and conditions carefully. Even if you don’t have any trips planned in the immediate future, your travel rewards card might offer other redemption options, such as merchandise or gift cards. But if your primary reason for obtaining the card was for travel, it’s best to keep saving up those points for that particular purpose. The value of the airline tickets and hotel stays is typically much better than the merchandise or gift cards offered by the card issuer.
When to Redeem Points
When you have a more general-use credit card rewards program — one that isn’t geared specifically toward travel — it’s best to redeem your points more frequently. If your card allows you to cash in your points to pay down your balance, you could be saving yourself a good chunk of money — and interest charges — starting right now. You might also choose to use your rewards points on items that you purchase most frequently, such as groceries or gas. Saving money where you can is one of the biggest perks of a credit rewards program, which is why cashing in when you can is often a smart move. Your credit card issuer will typically have a conversion chart so you can see exactly how your points translate into cash (for example, one point may equal one cent). That’ll allow you to determine how to best maximize your rewards points.
The Fine Print
Whether your rewards card offers points that can be redeemed for gift cards or merchandise, make sure to scour the terms and conditions. Some cards have a time limit on how long you can accrue a points balance without spending. Regardless of how you use the rewards, you’ll want to cash in before that expiration date. Your card issuer might also change the terms of its rewards program at any time. For example, they could decide to increase the threshold for redemption of certain rewards — which would effectively devalue the points you already have. They are required to notify you of any such changes, so be sure to read any notices from your credit card issuer when they come in the mail.
Keeping Your Points
Whether you choose to save your points up or redeem them every month, it’s critical to keep your account in good standing. Most credit card companies have a clause in the agreement allowing them to withhold rewards under certain circumstances — such as if you miss a payment. You’ll also lose out on your points if you close the account, so make it a point to redeem any points before you cut ties with that particular card. And check in with your account, and your points, on a regular basis. Some cards could yank your points balance if you leave the account inactive for a long period of time. If you think you might forget to redeem your points, see if your card offers an auto-redemption option.
Educating consumers like you on smarter credit card usage is just one of our specialties here at Ovation Credit. When you contact us for a free consultation, we’ll help you improve your credit with a thorough review of your credit report. Reach out and let us know how we can help you here.