A Simple Guide to Make Credit Card Rewards Work Harder for You

Pile of four credit cards sitting on a flat surface.

Many people get in trouble using credit cards because they have a hard time controlling their spending habits. However, if you don't have a problem paying off your credit cards in full every month, then there's a simple strategy you can use to take full advantage of the rewards that credit card companies pay to their cardholders.

To make the most of your credit card rewards, it pays to look at how you spend. Then, you can put together a portfolio of cards that will work well for you. Here's one simple way to put together a winning slate of cards to meet your needs.

1. Find a good all-purpose card.

The basis of your credit card portfolio should be a card that produces solid savings no matter what you spend money on. This card should offer the highest reward possible on all categories of spending, so that you can always use it if you have no other card that gives special deals on that particular purchase.

Choosing which type of credit card you'll use for your all-purpose card depends on which rewards you value most highly. For those who prefer getting cash back, you can find a couple of cashback cards that pay 2% in cash, and a wider range of cards will offer 1.5% or more in rewards. Those who prefer air miles can similarly find double-miles cards. The days of having to settle for 1% cash back or 1 mile per dollar spent are over, and you owe it to yourself not to shortchange your savings.

2. Max out food savings.

Everyone spends money on food, and it pays to have cards that will give you outsized rewards on what you spend to eat. One card offers up to 6% savings on grocery purchases of up to $6,000 every year, making it worth the $95 annual fee for most of those who eat at home. On the restaurant front, a number of cards offer higher rewards on eating out than on other purchases.

As with any specific-category card, it's important to understand that you typically won't get as good of a deal on purchases outside the main category. For other purchases, it therefore makes more sense to use your all-purpose card, reserving this one solely for food expenses.

3. Gas up on rewards.

Another popular category for saving money is the gas rewards card. You can find deals giving you 5% off gas purchases if you make the effort, and several cards offer savings that are nearly as great.

Be sure to look closely at the card rules to see which purchases it covers. Some cards only give you discounts on gas that you pay for at the pump, which leaves out purchases you might make at the convenience stores that accompany most stations. Other cards give rewards on all gas station purchases, including convenience store items.

4. Look at rotating category cards.

Finally, there are some cards that offer 5% rewards in rotating categories throughout the year. Some of these cards will give discounts on groceries for three months each year, gas purchases during a different quarter, and still other discounts on items like online shopping purchases or home-improvement expenses.

Rotating category cards can take extra effort, because most of them require you to sign up for the discount every three months. Some such cards also put a cap on the amount of spending that qualifies for the outsized bonus. Nevertheless, for those who expect to spend money in the categories that most popularly end up getting discounts, rotating category cards are worth a bit of hassle to put more money in your pocket.

Be smart with your credit cards

Card companies offer rewards in order to entice cardholders to make mistakes in handling their credit, overspending and incurring finance charges that more than offset any rewards you earn. But you don't have to play that game. By paying off your cards and still focusing on the best rewards cards for your needs, you can ensure that you'll end up ahead of the game and make the most you can from your credit cards.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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