Using Credit Card Rewards to Save Money

A credit card with a competitive rewards program may help you save money on bills by giving you discounts on valuable products and services. Some rewards programs also let you use your rewards points for cash or apply them to your balance. If you use your credit cards wisely and build up enough points, you can save a considerable amount on luxury items or practical necessities.

To get the most value from your credit account, shop around for a card that gives you the kind of rewards you really want. If you're trying to save money for a special vacation, look for a card that lets you apply your reward points to airline tickets. If you want to save money on clothing or electronics, look for a rewards program that gives you gift certificates to department stores or online retailers. You'll get more satisfaction from your rewards and have more control over your spending if you have a specific objective in mind.

How to Use Rewards

Credit card rewards programs vary from one provider to another, but the basic principles are the same. Each time you use your credit card to make an eligible purchase, you will accrue a certain number of points. After you reach a certain number of points, you may use your rewards in a number of ways. You may be able to apply your rewards to airline miles, buy specific products from a catalog or claim a gift certificate. The more points you accumulate, the more valuable the rewards will be. Rewards points may expire if you don't use them within a certain period of time.

Many programs target consumers who are looking for ways to cut their costs in specific areas. If you travel frequently, travel rewards plans can help you save money on your vacations or business trips. If you're a long distance commuter, look for a program that offers discounts on gas. Cash back rewards programs can help you save money on all of your purchases by paying back a certain number of points for every dollar you spend on your credit card. Once you've accrued enough points, you may request a cash payment.

You can maximize the value of your rewards if you keep your balance at a manageable level. By paying off your balance every month, you will avoid paying interest on the amount you owe. If you accumulate a balance, the interest on your purchases will soon counteract the benefits of saving money through a rewards program.

Using Caution with Credit Cards

Credit card rewards may give you the opportunity to take advantage of generous discounts and deals on everything from fine dining and exotic travel to cameras, computers and clothing. However, it's important to compare several cards to find a deal with a low interest rate. A card with a rewards program will usually have a higher than average interest rates to cover the cost of those rewards. Look for a provider that offers a rewards program at an interest rate you can afford.

When you're using credit card rewards to save money, remember that these programs are designed as an incentive to encourage consumers to use credit more often. Although you may accumulate points for buying basic necessities like groceries and gas, you can quickly run up a high balance if you use your card for standard household purchases. If you can't pay off your balance every month, or you're gradually accruing more debt than you can pay off, your best bet may be to rely on cash until you've reduced your credit card debt.

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