Watch Out for This Sneaky Trick That Limits Your Credit Card Rewards

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Don't assume a higher credit card rewards rate means a card has a better program.

If your credit card has a rewards program, read the fine print on the card offer carefully.

Sometimes, a card's rewards program looks like a great deal since it appears at first glance to offer a higher percentage of cash back or points for a specific type of spending that you do often. But watch out for one particular sneaky trick that could net you fewer rewards overall.

Does your credit card limit your rewards?

There are many credit card rewards programs that offer a very generous amount of cash back rewards for specific purchases, such as 5% or 6% cash back on a spending category like groceries or gas. However, it's important to look at the fine print to see if there's a limit on the amount of spending you can earn this cash back on.

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For example, the card may offer the bonus on spending up to $2,500. And once you've hit that point, you earn just 1% on your purchases in that category. If you spend a lot more than $2,500, you might be better off with a different card that allows you to earn cash back on all the spending you do.

Say, for example, that you spend $15,000 per year in the bonus category. If you use a card that pays 2% back on the entire amount, you end up with $300 cash back over the year from those purchases. But if you earn 5% on $2,500, then get only 1% back on the rest, you earn $125 from the 5% bonus -- on the remaining $12,500 you spent, you only earn $125 in additional bonus rewards, for a total of $250.

In this case, the limit on your bonus rewards makes the card that appears to offer fewer rewards the better deal for you. If you want only one card, opt for the 2% cash back card in this scenario.

The other option? Get the card with higher rewards on a limited amount of spending, and keep that limit in mind. Use that card for your first $2,500 in the bonus category, then switch to a different card. This approach is the best way to maximize the total rewards you earn, but requires that you manage multiple cards, which you may not want to do.

Whether you're looking for several rewards cards that you can use strategically or one great card for all your purchases, the bottom line is that you should understand all the details of the rewards program -- including any limits on your ability to earn bonus rewards.

By learning the intricacies of what each card offers, you can find the best credit card -- or combination of cards -- for your spending needs.

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