If you don't use it, you lose it.
Rewards credit cards are a beneficial way to earn miles, points and cash-back just for spending money. Some cards also have valuable perks like airport lounge access, extended warranty benefits, reimbursement for TSA pre-check, entertainment offers, concierge services and even insurance coverage for your cell phone. But, not all of these benefits are available automatically. So, to reap the full value of rewards credit cards, you have to be aware of all the offers and avoid blindspots catching you by surprise. Below, credit card experts weigh in on the mistakes that can offset the rewards you're hoping to earn—and how to make sure you're taking full advantage of your rewards card.
Failing to pay credit card balances off in full each month
The first lesson applies to all credit card users. If you're using your rewards credit card to accrue points or miles from everyday spending for groceries, entertainment, household expenses, and gas, be sure to pay your monthly credit card statement in full and on time each month.
"I think the biggest mistake is carrying a balance," shares Ted Rossman, Creditcards.com industry analyst. "Credit card debt is really expensive debt. There's a myth that you need to carry a balance in order to build credit. That's an expensive mistake—the best way to use a credit card is to pay on time and in full every month."
In fact, Rossman says carrying a balance does not help your credit score; it just costs you money in interest. So, as a general rule, try not to carry a balance if you don't have access to liquid assets to quickly pay it off.
However, in some emergencies, if you really need to put a sudden steep medical bill, home repair, or car repair on a credit card and pay it off, those may be exceptions. But, consider alternatives first. "Rewards programs offer a trickle of return in comparison. If you're going to make a debt-based purchase that you plan to pay off over time, you're better off getting a loan or some other kind of line of credit," suggests Chris Motola, credit and economic analyst, MerchantMaverick.com.
Failing to pick the best rewards credit card
Try and match a rewards credit card to your lifestyle. If you're pursuing rewards, don't just sign up for the first option you find or the one your friend recommends, make sure to use the right cards for the right types of spending. "Lean into your top spending categories," Rossman says. "For example, don't bother with a travel card if you're a homebody." If you're a foodie who spends a lot of your paycheck on eating out, however, you might benefit from a card that gives you points or cashback for dining at restaurants.
It's also important to cater your card selection to your lifestyle because many rewards credit cards have an annual fee. "Paying an annual fee for a card you're not taking full advantage of is another mistake," says Rossman. "Switch to something that better suits you. And if you're paying an annual fee, make sure you're using the perks you're entitled to use. Otherwise, switch to a no annual fee card."
Failing to understand how 0% interest credit card offers really work
Rossman maintains that 0 percent interest promotions can be a great way to get out of debt and/or spread out the impact of big purchases, but make sure to pay in full before the clock runs out. "After [the offer expires], the interest rate can skyrocket," he says. An especially nasty tactic—employed by many store credit cards—is to phrase a 0 percent promotion as "deferred interest." "This means if you don't pay in full by the time the clock runs out, you can retroactively be charged for all of the interest that would have accumulated, based upon your average daily balance all the way back to the beginning of the term," Rossman adds. Just be sure to read the fine print of your credit card agreement to make sure you fully understand the terms and won't be hit with unwanted surprises later.
Failing to opt in or enroll for all your card's offers
Not all credit card benefits are automatic. "Some have to be overtly activated," says Monica Eaton-Cardone, COO of Chargebacks911. "If you don't take the initiative, you can't enjoy the perks."
According to 2021 data from the Bureau of Consumer Financial Protection, more than one third of all cardholders have not yet signed up for an online account and downloaded their card's app. "That's a big mistake, because the app makes it so much easier to track your expenses and take advantage of all your benefits," Eaton-Cardone says.
For example, airline and travel credit cards sometimes require you to enroll and sign-up for dining reward programs. Other highly-valued travel perks, she says, such as loyalty programs and airport lounge access, might be contingent upon your enrollment. "So, download the app, and make sure you're not just aware of all the perks, benefits and freebies available, but also enrolled and signed-up for them too," she says. Even if you don't have a plan to use all of them, it's good to know what your benefits are. "Weird, unpredictable things happen all the time," adds Eaton-Cardone. "There might be a moment when you really need that hotel room, or an extra bag for a flight."
Failing to reach a sign-up spending bonus
Your new rewards credit card could have an enticing sign-up offer, such as 50,000 points if you spend $5,000 in the first three months. But, if you don't reach the required spending level in the specified time requirements, you will not be awarded the sign-up points or miles bonus. In short, it's a use-it-or-lose-it deal. However, you probably don't want to spend a bunch of money on unnecessary purchases either, so it helps to create a smart spending plan.
"Strategic planning can make the difference between enjoying your bonus and squandering it," Eaton-Cardone says. She says it might make sense to switch all your monthly bills to your new card, or to use the card on an expensive new purchase that you've been postponing.
Again, just be sure to pay off your balance in full and on time, so you're not offsetting your sign-up bonus with steep interest charges or late fees.