credit card rewards novice or a full-on expert, there are key tenets to follow. As the saying goes, “Everyone makes mistakes,” and the points and miles game is no exception. Whether you’re brand-new to the hobby or a seasoned pro, the potential for errors is always there. In this guide, I’m sharing my 10 “commandments” for travel credit cards to help you avoid some of the most common mistakes made by cardholders.
1. Thou shalt pay thy balance in full: Keeping a balance is a cardinal sin when it comes to credit cards. Unfortunately, I know several people who treat credit limits like free money, spending at will without any definitive plan to pay the balance down. Aside from being a surefire way to wreck your credit score (and hurt your ability to open cards or obtain a mortgage or other loan in the future), this behavior will also cost you money. Most rewards credit cards carry high-interest rates — although a few offer a 0% APR for an introductory period — so running up a balance and not paying it off every month will negate the value of any points or miles you earn. Whether you have one credit card or 20, always spend within your means and stay organized.
2. Thou shalt not miss a payment: Though not nearly as bad as running a balance, missing payments can be very costly. For starters, most credit card issuers charge a late fee of $25-$35 if you submit a payment even a single day late. Payments made beyond your due date can also significantly affect your credit score. Your payment history makes up over one-third of your overall credit score, and while one missed payment isn’t fatal, several are a cause for concern. Take advantage of the automatic payment features available on just about every credit card.
3. Thou shalt not cancel a card before thou hast opened a new one: Many people are surprised by how many credit cards I have, and I commonly get asked, “Don’t you need to cancel one card before opening another?” Absolutely not. In fact, canceling a card may actually hurt your credit score. There are two main reasons for this. For one, a large part of your credit score (30%) consists of your credit utilization ratio, or how much of your available credit you actually use. Secondly, another component of your credit score (10%) consists of your length of credit history, and part of this equation is the average age of your accounts. Simply put, we recommend not canceling a card unless doing so won’t hurt your credit utilization rate.
4. Thou shalt not cancel a card and lose thy points and miles: Another hazard of canceling a credit card is forfeiting the points and miles you’ve earned. Be sure to redeem before canceling cards with these types of rewards, as they will disappear once your account is closed.
5. Thou shalt not allow thy rewards to expire: While some loyalty programs don’t put an expiration date on rewards, others will wipe out your account after a certain period of inactivity. To be safe, I always recommend making at least one purchase annually on every card in your wallet and earning points or miles through a shopping portal for any types of points or miles for which you don’t have an associated credit card.
6. Thou shalt not miss out on a welcome bonus: Using a rewards or travel credit card for day-to-day spending is a great way to boost your earnings throughout the year, but one of the biggest drivers of credit card applications is the sign-up bonus. You can miss out on a huge influx of points by not spending enough in the specified time frame. Knowing the specific time frame and what counts is half the battle, but you also need to track spending.
7. Thou shalt take advantage of category bonuses: Many credit cards give you bonuses for purchases at certain merchants. If you have a card with bonus categories, be sure to use that card when making purchases in these categories.
8. Thou shalt not ignore cards with annual fees: If you’re new to this hobby, you may believe that cards with an annual fee are terrible. However, many of these cards offer lucrative sign-up bonuses, ongoing benefits, and anniversary bonuses that more than cover the annual fee. In addition, many of them waive the annual fee for the first year, giving you a free one-year trial before deciding whether to keep the card for the long term.
9. Thou shalt not underestimate the value of research: Before applying for a credit card, it’s important to do your research. Compare different cards, their benefits, and their fees to find the best fit for your needs. Look for cards with high-value sign-up bonuses, valuable rewards programs, and flexible redemption options.
10. Thou shalt not hoard points and miles: While it’s tempting to save up your points and miles for a big redemption, it’s important to remember that loyalty programs can change their terms and conditions at any time. Additionally, points and miles can lose value over time due to inflation. It’s generally best to redeem your rewards regularly for maximum value.
In conclusion, whether you’re a credit card rewards novice or an expert, following these 10 commandments can help you avoid common mistakes and maximize the value of your rewards. By paying your balance in full, not missing payments, being strategic with card cancellations, and taking advantage of bonus categories and welcome bonuses, you can make the most of your credit card rewards and travel for less.