by Jennifer Claerr

Created on: October 28, 2009   Last Updated: March 29, 2010

You can get a lot of cash and merchandse by using a rewards credit card. Still, it's easy to make mistakes when using rewards credit cards. Even small errors in managing your credit card balance and rewards can reduce or eliminate your rewards. You may even end up losing money by spending more money on merchandise or interest than you otherwise would have. While higher rewards can be tempting, lower percentage rewards that apply to a wide range of purchases are often the most lucrative.

To get started, apply for a rewards credit card that offers between .5% and 1% for everyday purchases. The credit card rewards should be earned for every single purchase you make, regardless of where you made it. Decide ahead of time whether you want to receive cash, merchandise, gift cards or travel in return for your rewards, because each program usually offers one type of reward, not all of the above.

In most cases, you'll get the greatest rewards by paying for as many regular expenses as possible with your rewards credit card. If possible, use only one rewards credit card to help the rewards to accrue faster. Pay for your gas, groceries, travel expenses, car repair, gas, electric and telephone bill with the rewards card. Use the credit card to pay for medical and dental bills and down-payments on large purchases such as a new car if you have enough cash to pay off the entire bill the next month.

Take advantage of higher-percentage rewards with extreme caution. At times, the credit card will offer you these higher-dollar rewards for things you don't normally buy, such as flowers, jewelry, books and electronics. Other times, the credit card will offer higher rewards for making purchases from a specific merchant or website. Don't make these purchases just to get the reward. Only make the rewards purchase if you were going to buy that item anyway.

Manage your money very carefully. Don't spend more with the credit card than you would have spent using your checking account and cash. Resist the temptation to spend the money that's building up in your bank accounts. Make sure that there's enough money in your checking account to pay off the rewards credit card in full every single month, then make that full payment on or before the due date.

Use your credit card rewards in combination with other discounts to save money. Clip coupons, look for rebate offers and free shipping deals on the items you want to buy with your rewards. Spend your credit card rewards to buy gifts and supplies for events that tend to be very expensive, such as Christmas, anniversaries and birthdays.

It's important to always read the terms and conditions of your rewards card carefully before you buy anything. There are often restrictions on when and where you can earn rewards on your purchases.Check to see if there's any spending cap or a minimum spending amount on the rewards. There may also be an expiration date for your rewards, so be sure to spend them while they're still valid.

Learn more about this author, Jennifer Claerr.
Click here to send this author comments or questions.