Accumulating Points With Your Credit Cards: Boon Or Bane?

Rewards points have always been there, even outside the realm of credit cards. To thank customers for their continuous patronage, the system of loyalty points has been devised—and credit cards are no strangers to giving points. One of the most lucrative offers handed out by credit card providers, reward point system has always lured people into becoming credit cardholders. What are rewards point, how can we make the most out of our it, and what are the common pitfalls that ensnare a lot of reward points hoarders?

Read: (The Power of Credit Cards)

What are reward points?

Reward points system, when stripped of the marketing shenanigan, is a marketing program designed to encourage customers to spend more, thus providing more profit to the company employing such tactic. These points are given to customers who engage in repeat transactions using their cards—and credit cards have used this program and almost perfected it. Cardholders can use accumulated points as substitute for cash when purchasing items or services. Furthermore, points are stored electronically in their credit cards, so there is no need for additional cards exclusively for storing information about rewards.

Usually, points accumulation of each credit card varies depending on their target market. Generally, brand-affiliated credit cards and lifestyle cards (motoring, female-oriented, etc.) have rewards points that can be used based on their category. For instance, a co-branded credit card for a pharmaceutical chain offers reward points for every swipe, and these points can be used to in lieu of cash at the same pharmacy chain.

Reward points that come with credit card can give you bang for your buck—if you’re aware on use them. While there is no problem per se with reward points program, the trouble starts when people aren’t mindful of how they use their credit cards for the sake of earning points.

How can reward points program be bad for cardholders?

As mentioned above, loyalty programs aren’t bad. However, things turn unpleasant when people start to make wrong priorities when using their credit cards.

One common pitfall among point hoarders is that they tend to go overboard by prioritizing point accumulation over wise spending. Instead of seeing points as a reward for the continual use of their cards, they see these points as an end goal, thus prompting them to spend more often than they should. The consequence? Racking up credit card bills that can hurt your budget.

Another mistake often committed by Filipinos who have an obsessive love affair with points is settling for a card that allows them to rack up large points at the cost of higher fees (e.g. annual fees and other financial charges). Instead of gunning for a credit card with the lowest interest rate, they end up with a card that puts them at a great disadvantage.

How can you maximize your credit card’s rewards program without compromising your budget?

Rewards points, when accumulated, will allow you to make purchases without the need to buy it in cash. Want to know how you can maximize your credit card provider’s reward points program? Here are a few tips:

Read: (Money Spending Tips: Effective Ways to Manage Your Credit Card Bills)

Compare different credit cards offering the same type of points

This isn’t just applicable to first-time applicants. If you really want to maximize your savings, compare different credit cards that target the same type of consumers and see which one offers maximum savings. For instance, if credit card A and credit card B both cater to motorists, check which one offers better terms such as interest rates, annual fee, and other variables.

Check the duration of your points

Not all points have no expiration date. Unfortunately, some credit cards have validity period when it comes to their reward points. Before you rack up points only to see them vanish because of expiration date, make sure to check this with your bank first.

Ditch the cards that are less rewarding

If you have multiple credit cards, the most logical thing to do is cut remove the plastic which gives you least rewards. Let’s say you have three cards and all of them give you different types of rewards, ditch the card with the least number of points. But make sure to use your points first before you cancel it.

Reward points can yield you maximum savings if you know how to use them. While it is enticing to hit as much points as possible, make sure to avoid making those points your goal or you’ll end up in shock once your bill arrives on your doorstep.