7 Things You Should Never Do With Your Travel Rewards Credit Cards
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Getting the most out of a travel rewards credit card isn't as easy as it might seem. Sure, the basic premise is simple: Rewards credit cards dole out points when you make a purchase with your card. Then you redeem them for free or discounted travel. But there are plenty of pitfalls to watch out for. (See also: Get Started With Travel Rewards With These Simple Steps)
Before you put too much effort into earning travel rewards, it's crucial to know what you're getting into. If you don't, you could end up with expired or useless points, or worse, debt.
If you're angling to use credit card rewards to your advantage — not the card issuer's — here are some mistakes to avoid along the way.
1. Missing the Minimum Spending Requirement for a Bonus
Most top travel rewards credit cards offer a sign-up bonus for hitting a minimum spending requirement within a specific length of time when you first get the card. For example, you might earn 50,000 points if you spend $4,000 within the first three months of card ownership. (See also: Best Travel Rewards Credit Cards)
If you should happen to fall short, however, you'll never see that bonus hit your account. That's true whether you're $20 short or $200 short. Unless you meet the minimum spending requirement in its entirety, you're out of luck.
If you get a new card for the bonus, make sure you're prepared to spend enough to hit the minimum with ease. You should also remember that the clock generally starts ticking on the day you're approved for the card — not the day you received it or activated it. So, if your card takes 10 days to show up in the mail, that's 10 days less you have to meet the spending requirement. If you're unsure of the exact date you were approved, call the number on the back of your card and ask. (See also: 5 Smart Ways to Meet a Rewards Card Minimum Spending Requirement)
2. Earning Loyalty Points You Can't Use
Racking up Hyatt Gold Passport points for a trip to Denmark sounds like a genius plan until you realize there are no Hyatt properties in the entire country. And earning Southwest Rapid Rewards points sounds smart — that is, until you realize Southwest doesn't even fly out of your home airport.
This might sound crazy, but it happens all the time. Believe it or not, some people get so excited about earning points or miles that they don't even check whether they can use them. (See also: Choose the Best Travel Rewards Credit Card With This Guide)
Before you sign up for a co-branded card that only works with a specific loyalty program, it's crucial to figure out if those points will leave you better off. If you're unsure or want more flexibility, steer clear of co-branded cards and instead choose a flexible travel rewards card that lets you use points for multiple airlines and hotel chains.
3. Carrying a Balance
Paying interest on your credit card charges is never a good idea, but that's especially true if you're using the card to earn rewards. Since rewards credit cards typically charge higher interest rates than non-rewards cards, your misguided pursuit of points and frequent flyer miles can leave you worse off than if you had a low-interest credit card.
Before you chase credit card rewards, you should be debt-free. Even better, you should track your spending to make sure you're on track with your goals.
4. Forgetting About Annual Fees
While many cash back credit cards don't come with annual fees, the same cannot be said about travel rewards cards. Some excellent premium cards come with annual fees as steep as $450, while more basic cards cost anywhere from $59 to $95.
Before you sign up for a rewards card, make sure you know about fees and when they come due. You should also make sure you're going to extract enough value from the card to make the experience worth it. (See also: Simple Guide to Evaluating Whether a Credit Card With an Annual Fee Is Worth It)
5. Letting Your Points Expire
Some points expire if you let them sit idle for too long, while others never expire. Of course, the burden falls squarely on you to keep up with expiration policies and deadlines. If you fail to plan and don't ensure your points stay active, you could see thousands of points disappear overnight.
Before you get too wrapped up in any rewards program, make sure you know what it takes to keep your points active. Some airline programs will wipe out your point haul after 12–24 months of inactivity, but you can keep your account active by using your co-branded credit card for a purchase or transferring points.
Either way, make sure you know the rules and stay organized enough to follow them. (See also: 4 Best Tools for Keeping Track of Your Rewards)
6. Not Using the Right Card for Your Goals
A friend of mine had been using her only rewards card — a cash back card — to save up points for an international flight that normally costs around $1,500. At the rate she was going (earning around 30,000 points per year), it would easily take her five years to earn that round-trip ticket — and that's only if the price didn't surge in the meantime.
Once I realized this, I guided her toward the Chase Sapphire Preferred® card for its generous sign up bonus. Once she earned the bonus, she would have more than enough points to transfer to the United MileagePlus program to pay for the same international ticket right away. Overnight, her strategy morphed from one that would take up to five years to a plan that would culminate in just a few short months. (Keep in mind the card has an annual fee.)
The bottom line: If you have a specific goal in mind, you can save time and heartache by optimizing your rewards from the start. (See also: 5 Steps to Getting a Free (or Close to Free) Vacation Quickly With Credit Cards)
7. Overspending to Earn More Rewards
Because rewards credit cards dole out points based on your spending, it can be tempting to spend more to earn more rewards. This is especially true when certain bonus categories come into play. If you can earn five times the points on a brand-new flat screen television, for example, you might feel inclined to buy one, even if you didn't need it.
But if your rewards goal is truly getting ahead, you should think long and hard before buying anything out of the ordinary. After all, spending money you wouldn't spend otherwise won't help you save money in the long run.
Remember, the best credit card rewards strategy is a simple one: When you use your cards for bills you were going to pay anyway, you'll truly be rewarded. But if you use credit card rewards to justify a spending spree, you're not really helping yourself. (See also: 7 Credit Card Reward Tips Many People Don't Follow)