I’ve talked before about some great rewards you can get from credit card spending. I’ve also talked about the importance of having a great credit score and the benefits one can reap over a lifetime just by having a great score. With these two things in mind, the next step is to maximize your credit card rewards. And I mean MAXIMIZE. As in sign up for a few cards every 3-4 months , also known as a churn. Contrary to popular belief, this does not hurt your credit score much, and actually will make it more solid in the long run as you will have higher and higher credit limits and lower and lower credit utilization ratios. So there should be no fear of getting the most credit card rewards possible.
But if you are the type who racks up credit card purchases like there’s no tomorrow, forgets to pay on time here and there or is okay with carrying interest month to month, don’t even think about getting credit card rewards. Actually, you should re-think your life and your use of credit cards at all. They are a tool, but only in the hands of those who know how to wield it. Willingly and knowingly carrying a credit card balance is one of the most foolhardy things one can do financially. If you are one of those people, maximizing rewards is not for you. If you try it, the only thing you will be maximizing will be your pain.
Now that we got THOSE people out of the way, let me show you a few reasons why getting lots of credit card rewards is awesome. The first thing that comes to mind is that miles and points are TAX FREE. There apparently is no way for the IRS to quantify how much a “point” is worth, especially since they can be worth different amounts in different programs. And let’s hope it stays this way. We work hard for our money, and being citizens of a country, we have to pay taxes. This is reasonable and necessary as taxes allow the maintenance of the roads we drive on and the libraries we frequent. But if there is a legal way to avoid taxes, I’m all for it. Miles used effectively, for example, can turn a first class ticket normally costing $5,000 into a $50 out of your pocket expense to cover the taxes. That’s $4,500 saved. Tax free. Now granted, most people don’t buy $5,000 plane tickets, but money saved is money saved. You can compare that $50 out of pocket expense to a $300 coach ticket you’d probably buy. That’s still a $250 savings. But in a lot more style sitting in first class.
A common complaint about collecting miles is that people say they don’t travel much and there’s no need to collect so many miles. In my experience, everyone has to travel somewhere at some point in their lives. Be it for a wedding, funeral, visiting family or for business, everyone gets on a plane at some point in their lives. And having miles ready for that day can be very lucrative. From a single credit card sign up, a person can easily get a round trip domestic ticket to anywhere in the country along with no checked bag fees. That is incredible piece of mind. Also, some of the more flexible programs such as Chase Ultimate Rewards and AMEX Membership Rewards allow you to redeem points for cash or gift cards. So if you know you’re not going to be flying anywhere soon, just trade those points for some cold hard (tax free) cash which you can use to pay down your debt or bolster your savings. Did I mention it’s tax free?
Another reason to get into the world of credit card reward maximization? It will help you spend less. Yes, you heard that right. The common refrain from credit card haters is that they make you spend more that if you use cash. In my experience, that’s only if you are not conscious of your spending. As long as you have a budget or some type of spending plan and realize that getting 5% cash back is peanuts compared to not buying the thing at all, you will not spend more with a credit card. On the contrary, I have found times where I want to spend less, just to maximize rewards. If I see something that catches my eye in the mall, I don’t buy it right away because I know i won’t get maximum cash back like that. I can use an online shopping portal like the Ultimate Rewards Mall or Bigcrumbs. I’ll probably forget to check it when I get home, or I’ll realize it’s not worth the effort so I just won’t buy it. If you look at every purchase you make in the frame of maximizing credit card rewards, you will want to buy less things.
And finally, if those reasons didn’t sway you, here’s the real reason you should get in on the credit card rewards game: it’s fun. It’s fun finding an awesome credit card sign up bonus, being approved for the card, and knowing it will cover a fun trip for you and your family. It’s fun to find ways to maximize your cash back, such as buying gift cards at grocery stores, to take full advantage of the many great grocery cash back cards out there. And it’s fun to kind of stick it to the big credit card companies, using their rewards to produce things of value for you which you might not have gotten otherwise. It’s not exactly Fight Club, but it feels good to use their money to enrich ourselves for a change.