How to use credit card rewards wisely

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It has become common place for credit card companies to offer rewards. You see them advertised all the time. In fact, you can’t NOT see them advertised. Every time I turn on the TV I see Samuel L. Jackson or Jennifer Garner telling me how great their credit card rewards are and how I’m missing out if I’m not using their card. You can get travel miles or cash back and you can even qualify for special discounts. Typically, travel rewards and cash back are the most popular. Do you like free stuff? I like free stuff! Of course it isn’t that simple. The question is can I take advantage of rewards without screwing up the rest of my finances?
First, we need to address why credit card companies offer rewards and then we can look at how to gain from their offers. First, credit card companies wouldn’t offer rewards unless they get something out of it. Credit cards make their money from interest derived from the balance you carry over on the credit card. Generally if you don’t carry over a balance, they don’t make any money off of you.  You know this.  Like all businesses they want to earn more income. Credit cards need to be used to make the bank money and an unused credit card doesn’t make them anything. So, how can they entice customers to use the card? You guessed it, entice them with beautiful, wonderful rewards!
Now you have decided that you want the rewards but you don’t want to pay for the rewards per say. Smart! I don’t want to pay for them either. This is the deceptively simple part. You need to pay attention. Not only do you need to track your expenses, develop and review your budget regularly and have a savings account slush fund for emergencies, but you have to pay attention to the expenses paid with your credit card. The only way to take advantage of credit card rewards is to pay off the balance when the statement is received. There is no other option. If you are too busy or too tired (I understand!) to closely track your credit card spending, then just don’t use credit.  Rewards aren’t for you! If you are an organized budget analyzer and get excited about details, then maybe it is for you. Remember you must take the money from your checking account and pay for the items purchased by the due date on the billing cycle each month. If you are not following this formula, you lose and don’t gain. Simple but not as easy as it seems. You have to be organized. Let’s face it, if all consumers followed this process the credit cards wouldn’t offer the rewards. Rewards are offered because it continues to help them drive business.
So if you think you have what it takes to reap credit card rewards make a detailed plan. If things don’t go as planned just stop using the credit and stick to cash only. For those detail oriented people, enjoy your free air fare or cash back! Finally, as always there is an app for that. Apps like Wallaby help you manage your credit card usage and rewards. Apps like these are not necessary but they could be a helpful tool if you like to keep it techie. Check out these articles on apps geared towards helping you keep track of your credit card rewards.
Finally in case I wasn’t clear, pay in full and on time every month to reap your rewards. Now go out there and find those rewards!

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