by Gordon Hamilton

Created on: January 12, 2010   Last Updated: February 24, 2011

Rewards credit cards come in a number of different forms. There are rewards credit cards which award points in exchange for using the card, which can later be converted to a wide variety of benefits, from air miles to grocery shopping vouchers. Similarly, there are cards which offer direct discounts on purchases made from a subsidiary company of the card issuer. By far the best rewards credit cards, however, for the majority of consumers, are those which afford cash back opportunities on qualifying spends. Getting the most out of any of these cards is not only about using them as often as possible, it is about knowing the drawbacks of using them inappropriately.

The first essential step to getting the most from a rewards credit card of any type is in choosing the most appropriate card for your circumstances and spending habits. It is important in this respect to know the potential pitfalls of rewards credit cards and how the card issuers make a profit from these seemingly loss making brands. Account conditions should always be read and digested in full and spending exclusions considered. The vital factor for getting the most from rewards credit cards is ensuring that the outstanding balance is cleared in full each month and always by the specified date. Where only a partial repayment is made, or payment is made late, interest will be charged and the interest rate is likely to be higher than on most conventional credit cards. Incurring interest charges of this type on a regular basis may not only negate in full the perceived benefits of the rewards credit card, it may mean that the card is proving less economical than traditional alternatives.

Irrespective of the type of rewards credit card used, it stands to reason that the more the card is used and the higher the spend, the greater the rewards will be in both the short and the long term. This does not only mean using the credit card when it is convenient to do so, or to purchase something which could not otherwise be afforded in advance of salary payment. It means that the card should be used as often as possible, even when paying by debit card or with cash is equally viable. The cash should be left in the bank and the credit card used, allowing the rewards to be earned and the cash payment to be made to the card at the time of the next monthly repayment.

In order to truly get the most from reward credit cards, it is necessary to take the process one step further. Where the credit card is used in lieu of available funds, it is important to look at what happens to these funds in the interim. Leaving them in a day to day bank account which generates no credit interest is an option but it is a far better option to transfer them to an interest bearing, instant access savings account. This can very often be done online and the funds switched back again when required to make payment. By appropriating the funds in this way, not only is the maximum level of rewards obtained from the credit card, interest is generated on the funds pending payment to generate a further bounty each year.

It is unlikely that anyone can make a living from using rewards credit cards appropriately. Where all relevant factors are considered, however, it is possible to generate significant benefits from the cards and have a useful cash sum in bank interest each and every year.

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