Credit card reward points can be a valuable asset if used wisely, offering benefits such as cashback, travel perks, or merchandise discounts. However, it's essential to approach the usage of these points with caution to avoid falling into a debt trap or overspending.
Here are five strategies to make the most of your credit card reward points while maintaining financial prudence.
Understanding The Value of Your Points:
"Understand the value of your points," advises Adhil Shetty, CEO of BankBazaar.com. Not all reward points are created equal, as their worth may vary depending on how they are redeemed. Take the time to familiarize yourself with the value of your credit card reward points. Some options may offer higher value for certain items or experiences, while others may be less rewarding. Compare your redemption choices and opt for those that provide the best bang for your buck.
Planning Your Redemption Strategy:
Rather than impulsively using your reward points, it's wise to plan your redemption strategy. Saving your points for larger, more valuable rewards can maximize their benefits. “Consider whether you truly need smaller, less significant items or if it's better to accumulate points for a more substantial redemption. By carefully strategizing your point usage, you can make the most out of your rewards,” says Shetty.
Sticking To Your Usual Spending:
The allure of reward points should never tempt you into unnecessary spending. While using credit cards for earning reward points is beneficial, it's crucial not to be penny wise and pound foolish. Stick to your regular spending patterns and only use your credit card for purchases you would have made anyway. Adhering to your budget and avoiding the temptation to overspend just to accumulate more points will help you maintain control over your finances.
“Don't engage in unnecessary expenses solely to meet your reward point targets. Focus on genuine expenses that align with your financial goals to ensure the rewards are truly worth it,” says Anant Ladha, founder of Invest Aaj For Kal.
Checking For Expiration Dates:
It's crucial to be aware of any expiration dates associated with your credit card reward points. Some points may have a limited validity, so make sure to review the terms and conditions. Utilize your points before they expire to avoid losing their value and to make the most of your rewards.
Maintain Credit Utilization Ratio:
Never exceed spending more than 30 per cent of your total credit limit. This not only helps protect your credit score but also ensures you stay within your budget. “If you feel the urge to spend due to credit card rewards, take a step back, avoid impulsive purchases, analyze the difference in your spending, and reevaluate your financial plans,” adds Ladha.
By following these strategies, you can make the most of your credit card rewards while staying financially responsible.