Survey says many credit card users are not cashing in on rewards.
DALLAS — Last October, I took my mom on a dream trip of hers — to get her first look at Niagara Falls, New York City, and fall foliage in New York State, New Hampshire, Vermont, and Maine. It was magical and made even more enjoyable by the fact that I paid for it all using credit card rewards.
I also cashed in reward accruals last year for other plane trips, rental car upgrades, cashback and hotel freebies. I always pay my balances in full to avoid owing interest, but I’m constantly using those cards to fill up, get groceries, eat out and pay bills so I can rack up and use points, miles and cashback.
So, I was perplexed when Bankrate sent me an email with this subject line: “Nearly 1 in 4 Rewards Cardholders Left Free Money On the Table”. They surveyed people late last year and found that in the prior 12 months, 39 percent of them did like I did with one of my cards and got back less than $300 in cash or gift cards.
Another 22 percent of people did like I did with another card and got $300 or more in cash back/gift cards. And just 10 percent reported that they had done like I did with a card of mine and used rewards for a free flight.
This is the part that got me: The survey found that 23 percent of respondents had not used their rewards in the past year. Bankrate found that curious as well, and pointed out that rewards don’t get more valuable over time, and in fact, “they actually lose value to inflation and program changes.” The experts advise that you “earn and burn rewards strategically.”
Of course, you must rack up credit card charges to get those rewards, but if you are not paying off those charges each month, interest is added to your balance at a high rate. And that can add up quickly.
Nerdwallet recently found that 21 percent of us are using plastic to earn rewards when we already have credit card debt. That means we’re getting further into the red.
They did the math on that and found that if you don’t pay off that balance each month, it’s quite possible that what you end up paying in interest on your revolving debt, “Outweighs credit card rewards within months”.
So to repeat: The best practice if you are earning credit card rewards is to keep knocking that balance back down to zero each month. Bankrate has some strategies that may help with that here.
Some people have asked me which rewards cards are best. I can’t endorse one card or the other, but suffice it to say, if you are a frequent traveler and the nearest airports to you are major hubs, you are probably going to use those carriers often. You may find it useful to have a rewards card affiliated with that airline.
Additionally, I have a credit card with an annual fee that is several hundred dollars. But it comes with a ton of rewards. I’ve done the math on that one and it more than pays for itself — several times over.
Here are some respected financial sites and their lists of what they consider to be the best rewards cards. You’ll notice some of the contenders appear on multiple lists.
