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The skeptical notion that if something seems too good to be true, it probably is, rings true for many when it comes to credit card rewards. Influencers claiming to travel the world for “free” and taking advantage of red carpet-like perks from credit card rewards can almost seem like a scam.
But self-confessed credit card “optimizers” know the promises can be very real. They know the value of credit card rewards and they look to optimize that value with every purchase, without going into debt or harming their hard-earned credit scores.
You don’t have to be an influencer or huge spender to make your cards work harder for you and reap real rewards. But you do need to disavow yourself from some common misconceptions that can hold you back from making the most from your credit cards.
Here are five “rules” you can break if you want to take your rewards to the next level.
1. You shouldn’t pay an annual fee
There are many perfectly fine credit cards that don’t charge a fee. But rewards optimizers know that if you want to ramp up the value, you must pay to play. Cards that carry a fee often come with valuable benefits and higher new cardholder bonuses. Optimizers do the math to determine if the points and perks make up for that annual fee.
If a card’s welcome bonus doles out 80,000 points when you meet the spending requirements, and its rewards are worth a minimum of 1 cent each, that’s at least $800 in value. If that card has a $95 annual fee, it’s a huge win, even before taking into account additional perks like lounge access, monthly credits and travel protections.
Avi Smith-Rapaport, a rewards optimizer and owner of a technology services company in West Hartford, Connecticut, said in an email that he finds value from paying annual fees for multiple credit cards.
“For some cards, the value has to do with travel benefits such as lounge access. My boys are older now and both travel on their own multiple times during the year. It is really a nice feeling that I know when they fly through certain airports they have a nice, safe place to relax in between flights, get free meals, and sometimes even a shower or massage,” he said.
Plus: Obsessing on points and miles? Stop saving them and start using them.
2. You only need one card
Rewards optimizers recognize there really isn’t one best card for all purchases. Sure, carrying one card can simplify life. But rewards from one card probably won’t pay for a vacation, at least not frequently.
That’s why optimizers usually have a handful of cards at their disposal for different types of purchases, which can include individual cards for groceries, travel, dining, utilities, online shopping and one for all other purchases.
“We have multiple cards for various reasons. Grocery is a major bonus category, having a family of four,” Smith-Rapaport said. “In my business, we use a card that earns bonus rewards on gas when my employees are on the road.”
With multiple cards also comes the opportunity to earn multiple sign-up bonuses, which is the fastest way to grow your pile of points. Some cards pair together perfectly and work in tandem to supercharge your rewards.
3. Getting another card will hurt your credit score
There’s a common misconception that applying for a credit card (or another card) will irreparably impact your credit score. But rewards optimizers know that maintaining a good credit score is absolutely possible with responsible use, even when you have a large card portfolio.
“The number of credit cards you have is less significant to the FICO
FICO,
score calculation than how you are managing those credit accounts,” said Tom Quinn, vice president of FICO Scores, in an email.
When you apply for a new card, you’ll receive a hard inquiry on your credit report, and that can shave a few points off of your score. But optimizers know that it’s a temporary loss, and those points can be made up for with good credit habits.
“Making on-time payments is the most important rule of thumb, and counts towards 35% of your total FICO Score,” Quinn said. “Amount of debt owed makes up 30% of your FICO Score.”
4. Earning points and miles isn’t worth the effort
It can be easy to glance at the amount of points required for a hotel stay and think you’ll never get there. Or that earning what seems like a measly 2% back isn’t worth it to have another card to manage.
But the best rewards optimizers know that the value of even small amounts of points and miles can add up to big returns. Once you learn some of the best ways to redeem rewards, it’s not that hard to squeeze extra value out of your points.
“Getting extra value here and there really can add up,” Smith-Rapaport said. “It is really not that difficult. My family travels and stays in really nice resorts. I am not sure the last time I paid cash for one of these resorts,” he added.
Also see: Air-travel complaints quadrupled between 2019 and 2022. Here’s why.
5. You should always use a card
It’s easy to get blinded by thoughts of that credit card rewards-funded vacation and swipe every chance you can. But sometimes it costs more to use a credit card than to pay debit or cash. If transaction fees are involved, savvy optimizers do the math to determine if the juice is worth the squeeze.
It’s easy to calculate with cash-back rewards: If you’ll be charged a 2.8% fee and you’ll only earn 2%, that’s not a good deal. The math is fuzzier with points and miles, because their value can fluctuate based on how you redeem them. Successful rewards optimizers have a general sense of what their points and miles are worth, and they always make sure the value of the rewards will outweigh the swipe fee before they charge it.
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Craig Joseph writes for NerdWallet. Email: cjoseph@nerdwallet.com.
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