How to actually get credit card rewards

It's easy to miss out on credit card rewards, or get into a routine. Here's how you can find cards where the rewards actually do work for you. 

It’s very easy to get into a routine with a credit card. Perhaps you signed up for one in college or took the first offer that comes along when you need a card and that’s the one you stick with for your primary use.

In my own case, I stuck with a card that earned rewards that went to a charity for a very long time. It made me feel good in the sense that my spending was actually contributing to that charity, though it was only earning about 0.5% of my purchases for the charity.

Eventually, I wised up and replaced the card with a Mastercard that offered rewards for a particular book store chain, thinking I’d earn some free books through using it. This time, I found that most of my purchases weren’t earning me much at all in terms of rewards.

Now, I use three credit cards for all of my purchases. One is associated with the gas station that I use exclusively, another is associated with my primary online retailer, and the other earns solid rewards as a generic grocery store card. Together, they earn me almost exactly a 3% return on my spending.

How does this work? It’s really pretty straightforward.

For starters, don’t carry a balance on any of your credit cards. Carrying a balance trumps any rewards that you might be earning. If you are planning on making a big purchase on credit and consider scooping up some rewards to be a “perk,” it’s not. Unless you’re on a special 0% interest introductory program, you’ll never earn as much in rewards as you’ll lose carrying a balance on the card.

It’s important to keep in mind that if you’re not carrying a balance on your card, the interest rate on the card really donesn’t matter much at all. If you never carry a balance, a 7.9% interest rate means the same thing as a 31.9% interest rate. In both cases, you’ll never pay a dime in interest.

The key is to only sign up for cards that line up with the purchases you’re already making. If you don’t, you’ll either find yourself buying things you don’t need to get rewards or not earning solid rewards on the purchases you make.

My suggestion is to look at the credit card offerings at the retailers you already use. What card is offered by your regular gas station? What card is offered by the grocery store you regularly use? What card is offered by your preferred online retailer?

Most of the time, these cards will offer very strong rewards for using the card at the retailer in question, with very moderate rewards for spending at other places. For example, the Target Visa gives you 5% off all of your purchases at Target, but nothing at all for purchases elsewhere.

Because of this, I have a default card I use for purchases outside of those places (one that gives me a moderate reward for all purchases), but when I’m shopping at my preferred grocery store or at my preferred gas station, I use the card associated with those places (because those cards earn me virtually nothing at places outside of those retailers). Since the vast majority of my normal purchases are covered here, I have no reason to sign up for other cards.

The goal here is to make sure that the healthy financial choices you already make are earning you as much as possible. If you’re in a situation where you use a credit card safely and without carrying a balance, it can be a useful tool, and you should choose the tool that earns you the best return. For that search, the best route is to start with the retailers you already use.