Baffled by Your Credit Card Rewards? You’re Not Alone

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While the whole point of having a rewards credit card is to reap big rewards, a large slice of consumers admit they don’t know how their own cards’ programs work.

A recent J.D. Power study of credit card satisfaction found that 41 percent of the more than 14,000 people surveyed don’t fully understand the rewards their cards carry.

By not understanding how these programs work, you could easily wind up leaving money on the table, rather than putting it in your pocket. Here’s how you can figure them out:

Read the fine print

Whether you want to apply for a new credit card, or have an existing rewards card, be sure to read all the fine print, even if seems dull as dirt. To use your card most effectively, you need to understand how that particular rewards program works.

But the details of rewards programs can be a moving target. Credit card issuers can change the terms, so you need to keep an eye out for any modifications that show up in your mailbox.

Make sure the rewards fit your needs

Some credit cards offer cash back on purchases. Others give you airline miles or points. Often points can be redeemed for a wide range of items, such as travel and merchandise.

When you’re trying to sort out which card to choose, be sure it fits your lifestyle and needs. An airline card that gives you miles when you make purchases won’t help if you’re afraid to fly.

Our credit card marketplace will give you the lowdown on various rewards credit cards and let you make comparisons among many popular cards.

Understand cash-back terms

While you can’t go wrong getting cash back for your purchases, many cards provide varying amounts of cash back depending on what you buy and how much you charge. For instance, some cards are more generous with cash back for groceries, while some provide extra rewards for spending on gasoline and utilities. Some limit the amount of credit card charges that qualify for cash back in a year, and others allow unlimited rewards.

In some cases, the categories in which you can earn the most cash back will rotate from month to month or will change every three months.

Check the annual fee

Many rewards credit cards carry annual fees, so don’t apply for one of those cards and then never take it out of your wallet. You need to be sure you’ll spend enough to justify the annual fee.

But with all that spending, make sure you pay your balance off each month. You don’t want to pay interest charges that cost as much or more than the rewards you earn.

Look for bonuses

Some travel rewards credit cards will give you extra points if you open up a new card and spend a certain amount of money in a certain period of time. The amounts vary by card. With the Barclaycard Arrival World MasterCard, for example, you’ll earn 40,000 bonus miles if you spend $1,000 within the first 90 days of opening your account. That essentially means you’ll save $400 on your next trip.

The key is to understand exactly how much you need to spend, and how quickly you need to spend it.

Consider how many cards you need

If possible, carry only one rewards credit card. By putting all your charges on that card, you’ll accumulate points or miles faster, so you can earn that free flight or purchase that new tablet sooner.

Know the limitations

It’s not uncommon for miles or points to expire. Often they’re good for only 12 or 18 months.

In some cases, your credit card issuer will only allow you to earn a certain number of points per year.

If your card has limitations, make sure to use your points before they expire, and try to avoid running up new charges on the card if you’ve passed your limit or won’t earn anything for it. In that case, another rewards card will come in handy.

Always keep in mind that applying for new credit cards can push down your credit score temporarily. And don’t forget: Carrying a balance can easily cost you more than the reward cards are worth.