8 Things To Know About Credit Card Rewards

Today, Americans own hundreds of millions of credit cards and collectively owe about $800 billion to credit card companies. But hey, at least we get reward points, right?

Well, before you can use those points wisely, you need to know how much they’re worth. The answer? About a penny apiece. That’s not such a bad conversation rate if you’re, say, heading to Ten Cent Beer Night, but when charging $15,000 earns you only about $150 in points, the ways in which you spend them becomes much more important. So whether you’re looking to earn more cash back or book a weekend trip, here are eight things you should know about credit card rewards.

1. Carrying a balance erases rewards
First of all, you should never carry a balance on a credit card. (Easier said than done, of course.) And rewards cards typically impose a higher interest rate than non-rewards cards, so if you’re paying interest on a big balance, you’re more than offsetting any rewards you might be earning.

2. Where you charge can greatly affect your points total
The Capital One No Hassle Cash Rewards card offers 2 percent cash back on gas and groceries, while the Blue Cash from American Express offers up to 5 percent. But there’s a catch …

3. Reading the fine print can earn you more rewards
You may not earn any bonus points at small businesses that are not “eligible.” So double check, but in general you’re better off at large corporate outlets.

4. Finding rewards flights is becoming nearly impossible
Along with charging you for using your armrests and going to the bathroom, airlines are offering fewer and fewer flights so that each flight is more packed with passengers. The result is fewer seats set aside for people using rewards points — and blackout dates around the times most people want to fly. So if you find a flight that works and you can use points to take it, take it.

5. Paying an annual fee isn’t always worth it
Think about it: If your card costs $85 per year (like the Continental OnePass Plus Card), you have to charge $8,500 just to break even with your rewards points. So look for cards that offer double miles or bonus points on certain purchases and then try to pay all of your bills with it.

6. You can trade your rewards points
If you’re short on the points needed to book a travel reward, you can trade and buy points on sites like points.com, which is free and takes about five minutes to join. Make offers to other members, barter your points for theirs, and haggle your way into that first-class seat to Des Moines.

7. Your rewards can expire
Most Bank of America cash rewards checks expire 90 days after they’re issued; but some cards, like the Chase Sapphire, offer points that never expire. Also, beware of points caps. Getting 5 percent cash back on gas is a great deal, but if that drops to 1 percent once you’ve hit a preset limit, it’s not so appealing.

8. The stuff in the reward catalog often isn’t a good deal
If you find something you like, look online to see how much it costs and then convert that to points, because using reward catalogs is often like buying Skittles at the movie theater instead of at the 7-11 before the show. Through Capital One’s No Hassle Rewards online catalog you can get a 46″ Sharp AQUOS Quattron LED HDTV for 262,600 points. At a penny a point that comes to $2,620 — but you can buy the same TV for about $1,500 online. Here’s a tip: If the retailer with the lowest price were, say, Best Buy, you could cash in your points for a gift card to Best Buy, which would essentially mean you were using points to score a discount on the lower-priced TV.