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Chances are good that you’re getting less out of a rewards credit card — or paying more for it — than you should.
A recent U.S. News & World Report survey of 1,500 rewards credit card holders shows that many folks make costly mistakes when choosing and using their rewards cards. Basically, they pass up free money, or throw away cash every time they swipe.
Even worse, these are senseless mistakes — cardholders can easily prevent them.
The two most costly types of rewards credit card sins boil down to not doing your homework. But you can do such research in minutes by using a free online tool like Money Talks News’ credit card search tool.
The tool’s menu on the left allows you to find and compare cards based on card features like travel rewards and cash back as well as annual percentage rate (APR). From there, you can choose the best card for you — and thus prevent yourself from making costly missteps like these:
1. Not shopping around
Nearly half of rewards credit card holders didn’t research their card before signing up for it, according to the U.S. News survey.
Further, most of these folks apparently never correct this costly misstep: More than half of survey respondents said they don’t regularly shop around to see if there’s a better card available than the one they currently have.
In other words, it’s possible if not likely that these folks could be earning more rewards or more useful rewards — or both — with another card. If you don’t take a minute to comparison shop, you can’t be certain that you are using the most rewarding and otherwise best credit card for you.
2. Carrying a balance
The survey found that 26 percent of rewards credit card holders carry a balance over from one month to the next at least seven times a year.
This breaks rule No. 1 of rewards cards: Avoid them if you carry a balance. Rewards cards tend to have higher interest rates. So, carrying a balance stands to cost you more in interest than you would earn in rewards.
If you carry a credit card balance, you should be working to get out of debt as fast as possible. That means not using a credit card at all — or at least making sure you pay as little interest as possible.
The latter requires shopping around to find the credit card with the lowest possible annual percentage rate, or APR, for which you can qualify.
Most people wouldn’t buy a home without first shopping around for the best mortgage — which can cost you thousands of dollars over the life of the loan. It’s basically the same with credit cards: If you don’t maximize rewards or minimize interest payments, you will lose money every time you swipe.
What’s your take on these findings? Share your thoughts below or on Facebook.
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