How to Get More Out of Your Card’s Rewards Program

For someone who’s savvy and knows how to work the system, rewards cards can be a stellar way to get free stuff. BUT there are many pitfalls. Ya, those pesky credit card companies are working against you, trying to get you to spend more than they give you in rewards.

How do you get the most out of your rewards programs?

==> Pay It Off Every Month

Rewards are given to you based on how much you spend, not how much you carry. You should try to pay off your rewards card every month rather than carrying a balance.

Rewards cards usually charge a higher interest rate than cards that don’t offer rewards. If you’re carrying a balance, the interest rate you have to pay on your credit card will often cancel out any rewards you’ll earn from the card.

==> Choose the Right Kind of Rewards Card

There are several different kinds of rewards cards you can choose from. You can get straight cash back, you can get frequent flyer miles or you can get some sort of product or merchandise. Read the information about each card carefully! What you think you see might not be what you will actually get.

Most people find that cash reward cards offer the greatest flexibility. That said, if you travel often, frequent flyer cards often pay the highest when it comes to rewards per dollar spent.

==> Be Careful of “Up To”

One common phrase you’ll find in credit card advertisements is “up to.”

What does it mean when a credit card company says you’ll get cash back “up to” 1%? That probably means you’re not going to get 1%.

Make sure that when you’re looking at credit cards, you know exactly what the conditions are to win rewards. If there’s a tiered system, figure out what tier you’d realistically fall under.

==> Put Your Rent and Other Large Payments on Card

How do you pay your rent right now? If you’re paying by check, see if you can put it on your credit card instead. Do the same with your car payments and any other large payments you have on your life.

Again, make sure you pay it off at the end of the month. Charging large payments to your credit card makes it easy to rack up a lot of points without having to add extra expense to your life.

==> Be Careful of Fees

Many rewards cards carry annual fees. Know exactly what these fees are when you sign up. If you’re not careful, the amount you’re actually saving through rewards can be eaten up by fees.

Navigating the world of rewards cards can take a bit of effort in the beginning. But once you have a system up and running for accumulating points without spending anything out of pocket, you’ll essentially be getting free stuff for the rest of your life.

The Psychology of Credit Cards

The credit card industry is a multi-billion dollar industry that leverages one of the least-understood powers that drive the world: money psychology. What is that? It has two parts, really. 1) People are less likely to spend real money. Even if they have enough cash to pay for something, they are more willing to pay with a credit card. 2) The psychology of credit cards causes people to spend more money and often shifts control of their finances from themselves to the credit card company. Huh.

Understanding how credit card psychology works can help you prevent spending too much and losing control to those companies that are only too delighted to have you make your every wish come true by slapping down the magic plastic. So how exactly does this psychology work?

==> Credit Cards Turn Cash into Concepts

  • Spending money on a credit card doesn’t have the same psychological effects as spending cash.
  • Research has shown that people are more likely to spend more money when they’re using a credit card than when they’re spending cash.
  • People are also less likely to remember how much they’ve spent when it’s on a credit card. People tend to underestimate their spending when they use credit cards as a rule of thumb rather than cash.
  • Why? Because a credit card operates on the concept of money, while cash feels like a tangible physical object with real value (a value we don’t want to give up).
  • The subconscious mind doesn’t instinctively understand that credit card money is valuable. Yes, consciously it’s something we understand. But it doesn’t carry the same weight as cold, hard cash.

==> The Illusion of Need

One way to look at money is accumulated power or “value.” By doing valuable work in the workplace, you’ve “accumulated” a certain amount of power or value as recognized by society. This value is presented to you in the form of a paycheck or business profits.

When you use a credit card to buy something with money you don’t yet have, you’re essentially saying that you believe you need this object so badly that you’re not willing to wait until you’ve generated the power it takes to bring that object into your life.

Instead, you’re borrowing from power you’ll create in the future. This comes at an immense cost. The cost is buried in small sounding credit payments, but the cost is huge nonetheless.

The reality is, this sense of needing an object right away is almost always an illusion. Aside from food and shelter, there’s really almost nothing you really, truly need.

Whenever someone puts a pair of Gucci shoes, a high end computer, an iPhone or an expensive date on their credit card, what’s really at work are subtle emotions. Emotions that say that spending this money will buy comfort, affection, being “cool,” etc. These are emotions that are created by expensive marketing.

When looked at objectively, most things that people put on credit cards really aren’t necessary. However, people feel like they absolutely have to have them. In the past, financial reality would have prevented them from giving in to this feeling. Credit cards, however, give people an easy “release valve” for all these emotions.

Understanding that these psychological factors are at play will give you the power to start noticing when they’re surfacing in your own life. Start to notice when you discount the value of money because it’s paper rather than cash. Notice your urges, especially when you feel like you have to buy something. “Retail therapy” is expensive! Ask yourself – do you truly need those Choos shoes or are you just lusting after them? Chances are, if you had to save up real money to buy them, you might decide you didn’t need them at all.