Are you making the most of your rewards credit cards?
If you have a habit of using only some of the rewards points you earn, you’re not alone. The average American household is signed up for more than twice as many rewards programs as they use, according to the market research firm Colloquy. And approximately $48 billion worth of rewards earnings go unredeemed every year, according to an April 2011 study by the same firm.
“Consumers on average leave about $205 dollars in rewards earnings on the table every year,” says Jim Sullivan, a partner at Colloquy. “And, since rewards memberships are growing, that’s likely to be a growing number as well.”
According to Sullivan, consumers are scattering themselves over so many rewards programs that they are struggling to keep up with them.
Many consumers with multiple rewards cards also tend to forget about their rewards balances — especially when the balances are are so small they’re easy to overlook. However, the value of those balances can add up quickly.
Here are five tips for making over your rewards card habits and redeeming the full value of your cards.
It’s tempting to sign up for numerous rewards credit cards just to take advantage of the lucrative rewards bonuses, but that might not serve you well in the long run, say experts. Sullivan recommends focusing on one or two rewards programs and maximizing their benefits.
“To maximize value, consolidate around the loyalty program of the retailer where you spend the most dollars,” says Sullivan. “In addition, have a primary credit card with rewards features that match your spending patterns and rewards preferences, and put most of your spending on that.”
2. Set priorities for rewards earnings.
To consolidate, you’ll need to decide which type of rewards are the most important to you. Do you want to stretch your hard-earned dollars by earning cash-back and saving on your purchases? Or, are you after perks such as free airline tickets or frequent flier elite status so that you can enjoy greater comfort when traveling?
Once you decide which types of rewards you truly prefer, concentrate spending in that program to maximize earnings.
3. Plan ahead to take advantage of special rewards card offers.
Keep an eye out for special offers throughout the year. Many cash-back credit cards, such as the Chase Freedom card and the Discover More card feature a 5 percent cash-back bonus in rotating categories throughout the year. Plan ahead so that you can concentrate purchases in those specific categories as they come up (and remember to sign up for the special cash-back deal on the card issuer’s website).
Similarly, over the holiday season, most rewards credit cards feature extra points for shopping via the card issuer’s website. For example, depending on the rewards program, shopping with large retailers such as Kohl’s, Apple, Macy’s or Amazon can earn you five to ten points per dollar spent in the holiday season compared to the rest of the year. Even if you’re already done with your holiday shopping for the year, check your card issuer’s program so you can plan ahead for next year’s holiday shopping.
4. Maximize redemption value.
Shopping around for the best redemption opportunities can be a great way to supersize rewards even further. The average rewards point is worth one cent (the equivalent of 1 percent cash back), so use this as a rule of thumb when valuing redemption offers.
Many rewards card issuers feature partner offers from major retailers, which give you greater value for your points. For example, with many rewards cards, $90 in rewards earnings can be redeemed for a $100 gift card with leading retailers, such as Land’s End, Macy’s, Kohl’s, Barnes & Noble and so on. That’s a 10 percent greater redemption value. In some cases, you can find even better value on gift cards for a savings of 20 to 30 percent, so this is an avenue well worth exploring.
5. Use a rewards management website to manage and track multiple accounts.
If you have multiple rewards accounts, consider using a rewards program management platform such as Points.com to track and manage your rewards programs. The site lets you keep track of your rewards earnings in up to 100 rewards programs, get alerts about special offers from the rewards programs you are enrolled in and trade or buy points from other members. Trading or buying comes at a cost, however, so be sure to take that into account before using that option.