Maximizing Credit Card Usage to Your Advantage

Let me start off by saying that if you have trouble controlling your spending and finances this IS NOT a post you need to read. For those of us that do well with budgeting personal finances, this IS NOT a post pushing you to get into more credit card debt! And actually, this isn’t even a post about applying for a new credit card, but rather to take advantage of the ones you currently already have. I know everyone has been over this topic before, but I think it bears reminding as we tend to forget, or at least I did until last night. The topic is…racking up credit card points to redeem for cash, travel, merchandise & gift certificates.

We have a couple birthdays coming up and I was racking my brain on how to afford gifts this year without breaking the bank. Well, I had just gotten done writing my post on “thinking outside of the box” so racked my brain a little and decided to look on ebay and craigslist for gift certificates that people might be selling for less then their cash value. You know, someone ditching a $50 gift cert for maybe $40, but no luck. Then for some reason I thought of our business credit cards (the reason eludes me as my memory isn’t what it used to be) and that some were “rewards” based! In fact, thats how my husband and I paid for our 2 airline tickets for a business trip last year. So now I’m thinking to myself that surely we have enough points racked up to cash in for something that I could use towards one of the gifts, if not both. So I go and check both credit cards and find out that…

…we have plenty of points racked up and for all 3 of our kids birthdays and we won’t have to spend a penny on other gifts if we don’t want to! We had enough racked up to “spend” at least $100 on each child, but that’s about a years worth of charges/points. Now keep in mind that we use these for our small business (so we rack them up faster then the normal consumer would), but you can certainly still take advantage of the rewards, just at a slower pace.

Here are a few things to consider before starting down this road, to see if “maximizing credit card points” would really work for you or not:

First, look through the ones you currently have and see if they have a rewards program. Many credit cards these days have them, even if when you first signed up they may not have. I always got for the ones with “flex” rewards, ones where I get to choose for a variety of options. We use a Discover Card and a Chase Visa “flex rewards” card, both of which have numerous offers that you can redeem points towards. The choices offered are usually cash, travel, electronics, gift certificates to popular stores, restaurants, home & garden, tools, etc… The Chase Visa we use even allows us to put the cash right back towards paying down the balance of the card, but that’s boring and no fun! I concentrated on looking for gift certificates for the kids and it seems that you get “more band for your buck” (well, in this case it would be points) if you cashed in the highest amount of points towards the gift certificate. For example, a $50 gift cert would cost me 5000 points, where as a $25 gift cert would cost me 3000 points. so obviously the $50 gift cert is a better use of my points.

Second, once you find a card (that you currently have!) with reward points, consider using it to pay for your normal expenses such as gas, groceries, movies, etc… then paying it all off at the end of the month. If you only use it for normal expenditures, then you should have enough to pay it off monthly, in theory. However, the pitfall that many fall into is that they start over-charging and spending more then they normally would. So here are a couple ways to curb over-spending:

  • Try it out for one month. If at the end of the month the total charged is more then you can afford to pay off in it’s entirety, stop using it all together or just use it for ONE type of charge going forward (just groceries, just gas, or just entertainment). You know yourself best, so use your own discretion.
  • Call your credit card issuer and ask them to reduce your limit to something you know is manageable. Yes, they will do this for you, even if they don’t like to! For example, if you know financially that a payment above $2000 won’t be do-able, ask for a $2000 limit. Be careful when doing this though. Most of the time you can ask for an increase to be back to where you once were as far as credit limit, but in our changing financial times they may have become more strict in doing this. So ask questions if you are concerned about this, especially if you think your credit score/financial standing has changed since first getting your credit card.
  • Check your current interest rate as many credit issuers will reduce it for you if you just call and ask (they don’t want to lose your business!), as long as you have been in good standing with them. Really, you shouldn’t be using a card with an interest rate over 10-12% for purchases, as the market is extremely competitive and that is the going rate. So if you happen to charge more then you can pay off at the end of the month (but you wouldn’t do that of course), you at least know the finance charge is reasonable while you gather up enough money to pay it all off the next month.

Third….be honest with yourself, be real! Before you even embark on something like this make sure you are financially responsible or have an accountability partner, like your spouse. The rewards you can redeem points for are great, but definitely not work getting into debt for! Nothing (as far as credit cards go) is worse then knowing that $5 fast food meal you charged is now accruing interest, how horrific!!

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