It can be very exciting to start travel hacking and accumulate all of those rewards points on your credit card knowing that soon you will be redeeming them for great flights, hotel stays and other travel perks. Just don't make these mistakes when using your credit card points for rewards.
But it can be all too easy to get carried away and make mistakes. After all, you are essentially using credit to make all of those purchases, and you don’t want to run the risk of damaging your credit. Or worse, not being able to pay your credit cards once the bill comes due.
Here are the 5 biggest mistakes to avoid when using travel reward credit cards.
Reward Points Mistake #1: Carrying a Credit Card Balance
According to Nerd Wallet, two out of every five people believe that carrying a balance on their travel rewards card does not affect the value of rewards.
Nothing could be further from the truth.
The interest charges you accrue from maintaining a credit card balance can easily outweigh the rewards. How? Because you are paying money for something that is ‘free.’ Make sure to set a budget and be able to pay off your card.
Every. Single. Month.
Credit Card Points Mistake #2: Overestimating How Much Points or Miles are Worth
Each credit card rewards program is different, and some points/miles can be worth more than others, depending on what credit card you have.
In some cases, these can even have different values within the same rewards program, based on how a consumer redeems them. Be sure to read the fine print and get a complete understanding of the rewards card’s redemption program before you apply.
Credit Card Reward Points Mistake #3: Be Sure to Redeem that Free Flight!
Less than half of consumers said they would redeem their points/miles for flights. However, many rewards programs offer the best bang for your buck when you apply your points or miles towards airline flights. Take advantage of this!
If you plan on using your points for other travel services such as hotels or even other non-travel-related expenses (gasp!) then you are not stretching your points or miles as much as you could be.
Credit Card Reward Points Mistake #4: Not Having a Rewards Strategy
If you sign up for a rewards program that promotes using your rewards for airlines and/or hotels, but don’t actually plan on using them for flights or hotel stays, then….why have you actually signed up for this rewards program? It’s amazing how many people are in it more for the sake of accumulating points, and then don’t actually take advantage of those perks.
Also, there are more strategies here:
Refer your spouse, friends or family members and earn points when they signup. Then, your spouse or partner refers YOU. Most of these cards require you spend a certain amount for 90 days, and then, once you hit that – collect your points – and do it all again with another card.
Form a strategy & stick to it.
Credit Card Reward Points Mistake #5: Buying Things Without a Plan to Pay for It
Many of these rewards programs have a welcome bonus, where you spend a certain amount within 3 to 4 months in order to get the bonus. Then you go out and use that spend on a new TV or other ‘luxury’ item, with no clear plan on how to pay for it. This creates a balance on your credit card (see point #1 above) that negates the purpose of the rewards program. Instead, use the required spend amount on everyday purchases, such as groceries, clothing, etc – expenses that you can easily fit into your budget and pay off at the end of the month.