Frequent travelers are often handed out a stunning amount of value by way of their travel rewards credit cards. These rewards can be worth hundreds of dollars, but must be used the right way to extract the value they are meant to provide. But a lot of times, people end up paying more than their travel rewards are worth. It mainly happens due to misuse of the rewards or sheer ignorance on the travelers’ part.
If you’re loaded with hundreds of dollars worth of travel rewards on your credit card, then you may check your facts and avoid committing below discussed blunders, and put those rewards to good use.
How travel rewards on credit cards are lost
1. You owe outstanding credit card balance – It’s always a good idea to pay off your credit card balances in full every month. However, for rewards cards, there’s usually a grace period irrespective of whether or not it provides travel rewards, hotel, airline or even cash back offers. If you consistently owe outstanding balances every month and make just the minimum payments, then you’ll be consistently paying a lot of interest on your purchases.
On top of that, annual percentage rate (APR) of credit cards these days could be as high as 20%. Hence, your travel rewards could cost you more than the financial advantage it is offering.
2. You rarely use your card – A lot of travel rewards credit cards must be used at regular intervals to earn or redeem reward points or miles within a deadline, or they lose the rewards value accrued. That deadline could be a year or two, but you’ll have to keep a watch on your card’s important dates like expiry, duration to redeem travel rewards, etc. earned from purchases. Use your cards diligently and redeem the rewards points whenever you get an opportunity.
3. You open fresh cards and carry debt on others – It’s become the norm to open new card accounts to take advantage of their bonuses. It is particularly evident amongst those travelers who crave travel rewards to lower their frequent trips’ costs. There are cards that come with hundreds of dollars worth of rewards, provided you use it within a said period. On the contrary, if you owe outstanding balances on your credit cards and have difficulty paying them off, then the reward points earned from new credit cards won’t deliver actual monetary value to you.
Perhaps it’s best if you pay back all your outstanding credit card balances and become eligible for the top credit cards with great terms and conditions as well as low interest rates.
4. Cashing in reward points in exchange for low rates – You’ll enjoy the most return on your investment if you use your travel rewards like miles or points to book flights or hotel accommodations with a particular airline or hotel. Many travel rewards credit cards have a redemption option wherein you can redeem your rewards for something that is valued differently.
For instance, if you don’t fly a particular airline that often and you want to redeem your rewards in return for gifts or any other merchandise, then it’s very likely that you’ll be getting a much lower return as compared to your rewarded miles’ rate.
Instead of losing out on good money, why not switch over to a rewards credit card that fits your needs and saves you money? There’s a popular adage that says, ‘a penny saved is a penny earned.’ Keep that in mind.
5. You don’t compare shop for better options – You may feel the need to redeem your rewarded miles for an award flight just because it’s free.But that isn’t always the best option. You need to survey the market, understand how travel rewards work and obtain multiple quotes to circle in on the most lucrative option. Never limit yourself to a single provider rather continue looking around for the best deal. If you plan your move and go for the best credit cards, then you may be rest assured that your redeemed travel rewards have provided you with the optimum value for your money.
To maximize your travel rewards and take optimal advantage of them, you must follow a basic two-pronged strategy. First, you’ll have to abide by the, ‘earn and burn philosophy,’ where you don’t allow your travel rewards to linger for too long and lose their monetary value in the process. Rather you need to crunch the numbers on the value of various credit card reward programs and how much you’re investing to get them. It’s important to factor in fees and taxes associated with these redemptions as well.
Second, you may want to consolidate to repay the dues on your travel rewards credit cards.
However, you need to mind your spending patterns to make sure it’d be a sensible move for you to consolidate.
Many consumers participate in so many travel rewards credit card programs, they end up feeling lost and overwhelmed. Don’t let that happen to you. Pay attention to your rewards program’s changes and decide whether or not you’ll have to alter your spending pattern too. You could save to earn bigger rewards or accelerate reward redemption to trample any devaluation. If you’re struggling to manage the outstanding balances on your credit cards, then you could negotiate with your creditors for an affordable payback amount.