Here Are the 3 Worst Ways to Earn Credit Card Rewards

Who doesn't love rewards? Most people do, which is why rewards credit cards are so popular. Over two-thirds (68%) of Americans have cash back cards, and nearly one-third (32%) have travel cards, according to a credit card study by The Motley Fool Ascent.

With these types of cards, the more rewards you earn, the more money you save. It's no surprise then that some people look for every potential method to earn as much as possible.

Now, there are plenty of smart ways to maximize credit card rewards. But there are also some that aren't a good idea and can even be a huge financial risk. Before you go too far in pursuit of rewards, here are the methods to avoid.

1. Buying groups

Buying groups are one of the more underground ways to earn rewards. Here's how it works -- the company running the buying group provides a list of products it's currently buying, with a payout for each one. Members of the group buy products from online retailers and ship them to the company's address. The company then pays members for those products.

For example, let's say you send a $1,000 MacBook Air to a buying group. You make the purchase on your rewards card to earn cash back or points. The buying group pays you $1,000, and presumably goes on to resell the product. You've earned rewards without spending any money.

There's just one problem. What if the buying group says it didn't receive that expensive product? You won't get reimbursed. You can contact the retailer, but if the tracking shows that the order was delivered, you may not have any luck getting a refund, either.

I used buying groups in the past, but they just aren't worth it. There are too many stories of lost packages from members, and if that happens to you even once, it can wipe out all your profits.

2. Purchases you weren't going to make otherwise

This is probably the most common, everyday mistake that people make with their rewards credit cards. They convince themselves to make purchases because of the rewards they're going to earn. Here are a few examples of this logic in action:

• You know that you don't need new $500 shoes, but you'll earn 5 points per $1 on them with your store credit card.
• You'd normally choose between Netflix and Hulu, but you have a credit card for streaming services that earns 3% cash back, so you get both.
• You start going out to eat more often because you have a dining rewards credit card and are earning 4 points per $1.

Don't let your credit card dictate your spending habits. The rewards you earn are never going to outweigh what you spend on a purchase.

For example, if your card earns 4% back at restaurants, a $100 dinner will net you $4. That's great if you were planning to go to dinner anyway. But if not, then you're really just spending $100 more than usual. After your $4 in rewards, you're still out $96.

3. Transactions with fees that outweigh the rewards

On most purchases and bill payments, the price is the same no matter how you pay. There are exceptions, though. Some types of transactions charge extra for credit card payments because of the payment processing fees.

For example, when you pay rent with a credit card, there's usually a transaction fee. There's also a transaction fee for paying your taxes with a credit card. You'll be able to see the fee amount before you make your payment.

Make sure to check if the fee is more than the rewards you'll earn. If there's a 3% processing fee, and your credit card earns 2% back, then there's no reason to pay that way. It's still costing you 1%, so you're better off paying with a debit card or any other method that doesn't carry a fee.

It's fun to find ways to earn extra rewards and boost your cash back or travel points. Just make sure that there aren't any risks to the methods you choose, and that they don't require you to spend more money than usual.