Credit cards offer consumers a convenient way to track spending as well as a grace period if you need extra time to pay off purchases. Some also offer valuable rewards like points, miles and cash back as well as added benefits such as purchase protections, extended warranties and even travel insurance. But how do consumers ensure they’re reaping the most value from their credit cards? Understanding your credit cards and the benefits they offer is a crucial first step.
How can consumers capture the most value from their credit cards?
Credit cards can offer perks you won’t find with other payment options, like cash back earned on purchases or airport lounge access with an eligible card. Perks and rewards are a primary reason many people turn to using credit cards in the first place.
“Aside from helping you build your credit score when used responsibly and offering increased protection against fraud, many credit cards offer rewards, cash back, access to airport lounges, or other perks,” says Christina Roman, consumer education and advocacy manager with Experian. Some cards even offer higher rewards for specific spending categories such as dining, groceries, or travel, she adds. “By using your card strategically for purchases in categories that align with your lifestyle, you can earn more rewards points or cash back.”
Additionally, credit cards often have introductory bonuses for new cardholders, as well as promotions for certain spending thresholds. This can result in miles for airline travel, or points that can be used for hotels or other redemption options.
“Taking advantage of these offers can help you secure rewards more quickly; however, as always, it’s important to remember that credit can be a financial tool and debt can be a financial problem,” Roman cautions. “It’s important to manage your spending responsibly and avoid the temptation to overspend in the pursuit of rewards or other perks.”
How can cardholders learn about the programs and perks a card offers?
There are many ways for a cardholder to learn about the benefits and programs that their credit card offers. “The main source is the credit card issuer’s website,” says Chris Fred, head of U.S. credit cards and unsecured lending at TD Bank.
In addition, cardholders can also get individualized explanations and advice on how to get the most out of their card by contacting customer support via their preferred method: online chat, phone call, etc. or by routinely checking in on emails and account notifications to ensure you are up to date on the latest offers and programs available, says Fred.
Card offers and terms are generally laid out clearly on an issuer’s website, as well as in your account portal. It’s also important to note that offer details can change, so regularly monitoring your account portal for program updates can allow you to make the most of your cards. Or, as Fred recommends, signing up for account notifications and email updates is always a smart idea.
How can cardholders earn miles, points or cash back with credit cards?
According to Fred, cash-back cards generally have a flat earn rate (such as 2% back on purchases), a tiered earn rate (such as 3% back on dining, 2% back at grocery stores, etc.) or earn rewards in rotating categories. “These cards typically allow cardholders to redeem in the form of a statement credit, check or transfer to a bank account. Some cards are also linked to the issuer’s rewards program and can be converted to points,” he says.
In general, points-based rewards can be claimed through the card issuer’s redemption portal, which may offer gift cards, merchandise, travel redemptions, and even cash back and statement credits.
Meanwhile, miles are typically limited to redemption in particular travel categories. “Depending on the type of travel credit card, miles and points can be redeemed for airline tickets, hotel stays or other travel perks,” Fred explains.
It’s vital to keep in mind and understand that card issuers assign different values to points and miles depending on their own system. “So it’s important to understand how they can be accrued and redeemed – and how to maximize their value – before signing up for a card,” Fred cautions.
➤ LEARN MORE:Guide to credit card rewards: Points, miles, vs. cash back
How do you justify if an annual fee is worth it?
Deciding whether a credit card’s annual fee is worth it depends on your unique financial situation as well as your personal spending habits. “For example, if you compare the rewards or benefits you can earn by using the card and they are greater than the annual fee, keeping the card may be the right move for you,” says Roman. “However, if you’re paying more for the card each year than you’ll earn back, it may not be worth it.”
Ultimately, the decision should be based on whether the benefits and rewards of the card align with your financial habits and goals, making the annual fee a worthwhile investment rather than an unnecessary expense, Roman says.
➤ LEARN MORE:Are credit cards with annual fees worth it?
So, as a cardholder, take into account the benefits offered, the value of the rewards accrued, and any extra savings or security the card may give, says Fred. “Think over your spending patterns as well as how best to utilize the card’s benefits.”
For example, if you travel frequently or spend a lot in the card’s bonus categories, the benefits and points may add up to a substantial amount, which could offset the annual charge. “On the other hand, if you frequently carry a balance on your credit card, the interest accrued could offset the rewards, and you might be better off finding a card with a lower interest rate,” Fred adds. “It all comes down to how you plan to use the card.”
