You’re an avid credit card user, loyally making purchases with your card each month because you know you have a solid rewards program. But what good are those points if you can’t make a travel or cash-back purchase when you want to?
The problem is that knowing when to redeem credit card rewards—which can come in the form of cash back, travel rewards or airline miles—can be tricky. The complexity can seem overwhelming, causing us to put off actually going through and using your rewards. Approximately 31% of credit card owners never redeem their rewards at all.
Getting the timing right can mean the difference between a cache of built-up cash, or an expiration you never saw coming. Keep in mind the following advice important considerations when deciding how, and when, to best use your rewards.
First, Check If (and When) Your Credit Card Points Expire
One problem is that many people aren’t even aware that their rewards points can expire after a relatively short period of time. It’s not always exciting to dig through your credit card agreement’s fine print, but it can mean the difference between using up hundreds of dollars’ worth of credit card points and completely missing out.
Credit card companies are hesitant to have your hoard massive amounts of points over extremely long-term situations. You’ll find that some credit card points rewards can expire after just 12 months, with some allowing you to keep them a full two years. If you want to save up for a new purchase using cash-back points, then you should save them up over the long haul—but don’t do so until you know you’ve got a deadline. Set a calendar email reminder that tells you when those points are about to expire.
Points expiration is especially common among co-branded airline credit cards. If you have one of those, make sure to pay extra close attention.
Don't Let Rewards & Bonuses Rush Your Decision
Nasdaq reports that those who redeem their credit card rewards regularly tend to spend about $1,128 per month, while those who fail to redeem reward points spend less—$645 per month.
This correlation may suggest that those with a lot of money to spend in the first place are looking for the best rewards, but it may also point to the fact that some people shift their spending to credit cards just for the rewards points. Some credit cards encourage additional monthly spending because of the prospect of receiving a big bonus after you sign up.
Instead of making up purchases for the short term just to get rewards, you should sign up for rewards cards right before you have a set of big purchases to make. This will allow you to earn bonuses naturally and to not get into any unnecessary debt.
Different Goals, Different Strategies
There’s not always one single answer for when to use credit card points, especially if you have different goals from the next credit card consumer. Here are some different strategies and how they might impact your decision to redeem credit card rewards:
- Timing a vacation. If you have hotel bonuses built up and plan on using them for a vacation, then your end-game is simple: Use them at the opportune time. There’s no reason to hoard points if you never plan on enjoying them. Know that some resorts may prevent you from bundling multiple discounts. Make sure you are familiar with all terms before you plan a redemption.
- Scheduling a flight. If you add up airline miles over the months, remember that you’ll likely have to think about redeeming them when you book a flight. At the very least, you should plan your points around when you’ll be purchasing the trip, which can often be well in advance. Some airlines may tack on charges if you book a flight too close to the actual flight.
- Saving for a big-ticket item. Making purchases you were going to make anyway (such as furniture purchases when moving) are great ways to build up cash-back rewards and save for another big-ticket item. But be sure to check the fine print of your credit card agreement to make sure that the purchases you do make apply toward your points. Sometimes, cards will only allow you to use cash back on purchases made within the last 30 days. If it takes eight weeks for your rewards points to post to your account, you may miss your window to apply those points toward that big purchase.
Don’t Make These Credit Card Rewards Points Mistakes
While your individual redemption timing will vary depending on your rewards goals, there are a few universal mistakes that everyone can avoid:
- Saving rewards for emergencies. Credit card points are not an emergency fund. While sometimes the timing may line up between holding a cache of credit card points and a need for a sudden purchase, it’s better to use savings accounts for emergency cash.
- Lack of mindfulness. The most important way to properly time your credit card reward redemption is to know when the points might expire. Have a plan for what you want to do with them. A lack of mindfulness can mean missing out on that purchase you have on your wish list or forgetting about an upcoming trip for which you need rewards points.
Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.
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