What You Should Know Before Cashing In Your Rewards Points

A surprising amount of people never redeem the rewards points or airline miles that they earned from using their rewards credit cards.  Perhaps this is because they have no travel plans that they can use their miles for or they don’t think that the points are worth redeeming, or they simply forget.  According to one survey, over 70% of all airline miles earned from rewards credit cards go unused each year.

People who do want to cash in their rewards points, for airline miles or other bonuses or cash-back perks may find the process less straightforward than anticipated.  Credit card companies are notorious for putting traps in the fine print to make it difficult, if not impossible, to get the full value for rewards points.  Some people might even find that the rewards they have accumulated over the years have expired and are completely worthless.

The first step in the rewards redemption game starts well before you redeem any points.  In order to avoid some of the most common pitfalls, you have to choose a card that fits your spending habits.  You can compare your needs with what a credit card offers.  Asking questions such as “how long before my points expire?” and “are their any barriers that can keep me from getting the maximum amount of rewards that I earn?” are good initial inquiries that can help with the process of choosing a card.  After you are sure that the company will not put too many barriers between you and your rewards, you can sign up and start earning.

It can pay to be aware of all the rewards options.  Some cards pay rewards via gift card or at least give people a gift card option as well as offering them cash-back or account credit.  Often, you can get more of a value from gift cards (they “cost” fewer rewards points than a similarly valued credit or cash-back bonus).  This is because card companies have deals with certain retailers and they do not pay full price for the gift cards.  The retailers want new customers and they assume that, on average, people will spend more than their gift card is worth over the course of their lives.  So when you are looking to redeem your rewards, see if there are gift cards for places that you already shop at regularly.  If there are, you can get more value out of your points by opting for the gift card instead of another kind of bonus.

You can often get the most out of tiered rewards programs by waiting to cash in your points. Some programs reward people who wait until they’ve accumulated a lot of points before they cash in.  These patient savers can get rewards like bonus points and other perks that are reserved for high-volume spenders.  At the same time, it is imperative to make sure that your rewards points don’t expire.  This is the most confusing aspect of the reward card game.  Some cards put an expiration date on points and consider any points not cashed in during a specific time period to be completely value-less.  This is a delicate balance, but one that can be made much easier by reading the fine print and knowing the card’s rewards points time-line.

Consider your rewards as a perk for using a credit card.  It is usually never a good idea to spend extra so that you can earn more rewards points.  In the long run, the money spent to reach a certain rewards benchmark will far outweigh the rewards gained from reaching that benchmark.  Steady spending coupled with regular payments (to avoid debt and excessive interest payments) is the best policy for maximizing rewards.

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