How to maximize credit card rewards

Each time you use a rewards credit card for online and in-person purchases, it’s an opportunity to earn rewards in the form of points, miles or cash back. Grabbing these rewards and making the most of them isn’t hard to master, but putting some solid strategies in place can help you achieve that.

In a typical year, cardholders can earn hundreds of dollars in cash back, free flights, free hotel rooms and other redemptions. Here are seven tips to help you maximize your rewards cards.

1. Use credit, not debit

When you use a rewards or cash back credit card, it’s like you have a built-in discount.

“For consumers with good credit, leading cash rewards credit cards can give you between 1.5 percent and 2 percent back on every purchase,” said Patrick Beckman, former contributing finance editor for Rave Reviews, in a previous interview.

Beckman advises not to use a debit card and to reach for a credit card instead.

“The most apparent cost of using a debit card instead of a credit card is lost rewards,” he says. Additionally, debit cards don’t offer the same protections as credit cards.

“With a credit card, reporting fraudulent charges is very simple and you don’t have to pay for them,” says Beckman. “However, since a debit card pulls money straight out of your account, it can be much more difficult to get the money back after it’s spent.”

Even though you can find fraud protection on both credit and debit cards, charges on a credit card won’t immediately drain your bank account like charges on a debit card.

2. Take inventory of your spending habits

To maximize rewards, R.J. Weiss, founder of The Ways to Wealth, recommends analyzing your personal spending habits and your budget before even applying for a card to see if the rewards it offers are in sync with what you spend the most on.

“Identify the credit cards that provide the highest percentage of cash back for categories where you spend the most. For example, if most of your credit card spend takes place at grocery stores, look at the cards that give a higher cash back rate for grocery spending,” says Weiss.

3. Diversify cards to maximize your rewards

To optimize your credit card reward potential, a wise strategy is to have several cards with high reward rates in different categories. For example, you might use one credit card for grocery shopping and another for travel expenses.

Beckman highly recommends the Blue Cash Preferred® Card from American Express for U.S. supermarket purchases, as it earns an impressive 6 percent cash back (on up to $6,000 per year, then 1 percent thereafter).

If you switch cards to yield better cash back on a night out, you could pick the Capital One® Savor® Cash Rewards Credit Card*, which gives 4 percent cash back on entertainment and dining purchases.

If you pair the Blue Cash Preferred with the Capital One Savor, you can get maximum cash back for all your meals — at home and at restaurants. The Blue Cash Preferred gives you 6 percent cash back at U.S. supermarkets and the Capital One Savor gives you 4 percent cash back on dining. If you used just the Capital One Savor, you would only get 3 percent cash back at grocery stores compared to the 6 percent on the Blue Cash Preferred.

Pairing cards can take your rewards to the next level by optimizing benefits in different categories. Most cards have a reward focus, such as travel or gas.

“A travel card … will give you fantastic benefits when it comes to hotels and airlines, but it won’t reward your everyday spending,” says Eric Croak, founder of Croak Asset Management.

Picking separate cards for your top spending categories will enhance your rewards and ultimately put more cash in your pocket.

“Once you’ve identified the categories in which you spend the most — whether it’s groceries, gas, travel or dining — you’ll want to have a credit card that rewards bonus points in those categories,” says Beckman.

Choosing the best cards to combine for maximum cash back can significantly boost your reward earnings over time. If you cannot identify specific categories where you mostly spend, you could always opt for a rotating category card like the Discover it® Cash Back.

Additionally, if you want to target travel rewards, you will want to diversify the types of points you accumulate. This is how credit card travel reward aficionados earn free vacations.

4. Watch out for bonus caps and limits

Some cards, like the Chase Freedom Flex℠ and the Bank of America® Customized Cash Rewards credit card, put a spending cap on how much you can earn in bonus points or cash back on in a particular category. Cardholders should carefully track when they meet these caps, so they can continue to earn a high level of rewards by using the other credit cards in their wallets with the best rewards potential available at the time.

”If you do the math on these cards that cap out, like Amex Blue Cash Preferred or Chase Freedom [Flex], you may be receiving less in rewards than if you got a card with no reward limits,” says Kasey Ring, president and founder of Upward Personal Finance. “Do the math before you apply.”

Weiss recommends another strategy to monitor caps and limits — download your credit card provider’s app to track your spending and earning.

“Most of the major card issuers have sections [in their apps] that allow you to track your bonus spend for that period,” Weiss says.

5. Don’t overspend when earning sign-up bonuses

Many top rewards cards come with generous welcome bonuses, usually in tens of thousands of points and miles. These intro offers are usually the quickest and easiest way to earn a stack of rewards that large — as long as you meet the spending requirement.

However, these intro bonuses are useful only if you manage to earn them without spending outrageously outside your budget. If not, you may find yourself accidentally spending more to earn the sign-up bonus than it’s even worth.

How do you meet a $4,000 spend goal, for example, if you’ve already made all your usual monthly purchases? Try to prepay your utilities. If your utility company allows for prepayment, you could use your credit card to pay for your utility bills — electricity, water, Wi-Fi, etc. — a few months in advance. Other expenses you could possibly prepay include car insurance, student loans and rent or mortgage.

Along the same lines, you should set up your card as the default payment on all your subscriptions, such as streaming services, while you’re still earning your sign-up bonus. Later on, you can always switch your subscriptions to a different card.

When going out to dinner or drinks with friends and family, you could also offer to foot the bill for the entire party and ask everyone to reimburse you their share. If you’re already planning a vacation, start purchasing your flights and lodging now, rather than later, and put them on your new card.

If all else fails, buy gift cards to stores or restaurants you frequent. You can use them or give them to others, for birthdays or the holidays.

6. Keep tabs on your rewards

Checking on your reward progress will ensure you’re getting the most “bang for your buck,” according to Croak. He says monitoring is also important if you have limits on the rewards you can earn, as you might want to switch the card you use if you have maxed out your annual cash back on a certain card.

Furthermore, monitoring rewards also ensures you’re taking advantage of a card’s potential, especially if it has an annual fee.

“If the card has an annual fee, you will want to ensure that you are earning enough back to cover that fee and more. If your total rewards earnings can’t match the annual fee, you will want to reconsider the cards you use,” Beckman says.

You should also check regularly to see whether your card’s rewards have changed. During the pandemic, for example, many credit card issuers changed or expanded their rewards to accommodate shifting spending habits as people spent more time at home. Many credit cards began offering points for purchases such as food takeout and delivery, online grocery orders and streaming services.

7. Always pay bills in full and on time

If you don’t pay your entire balance on time and in full, you are subject to hefty interest rates, which cut into or completely erase your reward earnings.

“Credit cards are notorious for having very high interest rates — anything from 15 percent to 30 percent,” says Beckman. “If you carry over a balance on your card from month to month, the interest you pay will negate any value you get from the rewards. You will be earning anything from 2 percent to 7 percent in rewards, but as soon as you carry a balance and accrue interest, you will lose most — if not all — of the value.”

The most important caveat for maximizing your credit card rewards is to pay off your balance in full each month.

“No credit card rewards will ever be worth more than the cost of high-interest debt,” says Weiss.

Bottom line

Rewards credit cards give you cash back and other benefits just for making your usual purchases. A starting point for winning rewards is to use your credit card instead of a debit card. You’re earning every time you use your credit card, plus you’re gaining purchase protection.

Choose rewards cards based on where you spend the most. You can earn miles from co-branded cards for travel benefits or cash back or points with bonuses for specific categories like dining or shopping.

Finally, when maximizing rewards, it’s important to only use your card when you can pay your balance in full. Otherwise, you’ll pay enough in interest to negate what you’ve earned.

*Information about the Capital One Savor Cash Rewards Credit Card has been collected independently by CreditCards.com. The issuer did not provide the details, nor is it responsible for their accuracy.