Published in: Credit Cards | Jan. 15, 2019

This 1 Tip Will Help You Maximize Your Credit Card Rewards

By:  Lyle Daly

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It’s challenging to get a large number of points or cash back on your credit card year after year. Here’s the one tip that will help you consistently earn big credit card rewards.

Image source: Getty Images.

steps leading up to gold star

Image source: Getty Images

When you’re just getting started with credit card rewards, earning those rewards seems like a breeze. You apply for one of the best credit cards, spend enough to get your sign-up bonus, and then you’re already up a few hundred dollars or 50,000 points.

That’s a good way to start, but sooner or later, you’ll need to know how to maximize your credit card rewards over the long haul. Being in this position myself, I’ve found one effective way to consistently earn rewards. But first, it’s important to understand why the typical advice of “get new cards and collect sign-up bonuses” isn’t a sustainable strategy.

Why getting sign-up bonuses doesn’t work forever

It’s the most common piece of advice on earning more rewards, particularly travel rewards -- apply for multiple credit cards, either simultaneously or every few months, so that you can earn all the best sign-up bonuses and build a huge balance of points.

In fairness, I’ve done this, I’ve recommended it, and I still recommend it to anyone who doesn’t mind managing different cards. It works for a while, but there are also several pitfalls to be aware of.

Banks are putting more restrictions on sign-up bonuses: Banks don’t like it when consumers get a card, get the sign-up bonus, and then cancel the card or stop using it. To counteract this, they’ve gotten stricter with their policies regarding bonus eligibility.

Not all sign-up bonuses offer points you can use easily: Sure, there are tons of sign-up bonuses out there, but they don’t do you much good if you can’t use the points you earn. For example, 100,000 points with a hotel you don’t visit or an airline you never fly with will be hard to redeem. If you’re focusing on points with one rewards program, then you may only have one or two bonus opportunities.

Annual fees can get expensive: Bonuses are great, but shelling out hundreds or thousands of dollars on annual fees isn’t. It’s easy to forget about how much a credit card costs you, especially if it’s a card where the annual fee is waived for the first year.

The key to maximizing credit card rewards

The most effective way to max out your rewards is to get multiple credit cards and use the card that will earn you the most back on every purchase.

While this may sound overly complicated at first, you can actually boost your rewards substantially by having just two or three credit cards instead of one. With that number of cards, it’s not hard to keep track of where to use them. I recommend carrying the following:

  • One card that earns a fixed rate on all spending
  • One card that earns bonus rewards in a popular spending category of yours
  • Either another card that earns bonus rewards in one spending category or a card with rotating bonus categories

Your fixed-rate card is what you’ll use for the bulk of your spending, and most card issuers have one that will earn at least 1.5 points per $1 or 1.5% back on all purchases. Cards with bonus categories can earn 2%, 3%, or even 5% back.

What many consumers do is use a single credit card, but the problem is that you’ll miss out on potential rewards. If you only use a fixed-rate card, you aren’t getting a higher rewards rate in bonus categories. If you only use a card with bonus categories, then you’re not earning as much as you could be on your non-bonus spending.

How much more can you earn with multiple credit cards?

Here’s a quick scenario to demonstrate the kind of difference it can make when you match different credit cards to specific purchases. Let’s say you normally put $2,500 per month on your credit card: $500 of that is in a bonus category, where the card earns 3% back, but for the other $2,000, the card earns 1%.

You keep the card earning the 3% back on $500 in spending, and then add a card that earns 5% back in a category where you spend $300 per month and a fixed-rate card that earns 1.5% back on the remaining $1,700 in spending. Take a look at what you’d earn before, with the one card, compared to what you’d earn after, with three:

When $500 at 3% back $300 at 1% back/5% back $1,700 at 1% back/1.5% back Total rewards per month
Before $15.00 $3.00 $17.00 $35.00
After $15.00 $15.00 $25.50 $55.50

Data source: Author’s calculations

That’s an example of what you could do through a combination of the best cash-back cards, but you can follow the same strategy using travel cards with high rewards rates. If you had travel cards earning the same amounts back, you’d go from 3,500 points per month to 5,550.

Squeezing the most points out of your spending

Even though $20 more in cash back or a couple thousand extra points per month may not blow you away, those extra rewards add up. By playing your cards right, you could end up with at least $250 in extra cash back per year or 25,000 points, which can get you a free round-trip domestic ticket.

Sign-up bonuses are undoubtedly the fastest way to collect more points, but using multiple credit cards and matching them to the right spending categories is a long-term option that will keep working after you’re out of bonus opportunities.

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