What Not To Do With Your Credit Card Rewards

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What Not to Do
With Your Credit Card Rewards
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There is a lot to love about credit card rewards.
Cardholders earn points, miles, and cash back
that that can be used for award travel or other
valuable benefits. And other than annual fees,
these rewards can be earned without any cost when
cardholders avoid interest by paying their
balances in full.
But many cardholders fail to appreciate that how
they spend their rewards is at least as important
as how they earn them. When you consider spending
your hard-earned points and miles you should
never do the following six things if you want to
make the most of your plastic points.
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1.
Redeem points or miles for merchandise awards.
Nearly every airline, hotel and bank rewards
program has merchandise awards available. The
products range from kitchen gadgets to high-end
electronics, but there is one thing they almost
all have in common -- they are a terrible value.
Merchandise awards typically return only one cent
in value for each point or mile spent, and that
is only if you consider the product's full retail
price. In fact, cardholders are getting less than
one cent in value for their points and miles when
they likely could have purchased the items at a
discount and received additional rewards from
using their credit card for the transaction.
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2.
Redeem rewards for statement credits.
Cash is valuable, but many reward programs offer
minimal value when used for statement credits.
cardmembers who choose this option only receive a
half a cent in value for each of their points.
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3.
Allow points or miles to expire.
There is nothing as devastating as attempting to
redeem valuable points or miles only to learn
that they have expired. Every airline and hotel
program has its own rules, but retaining a
co-branded credit card will usually keep the
account active.
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4.
Lose rewards by canceling your credit card.
Thankfully, points in bank-operated loyalty
programs don't expire the way airline and hotel
points and miles can. Nevertheless, cardholders
need to be aware that unclaimed rewards typically
disappear when the account is closed. So if you
are ready to cancel your credit card, make sure
to redeem all of your points first.
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Forfeit rewards by not keeping your account in
good standing.
5.
In the fine print of most credit card agreements
is a clause that allows the bank to withhold
rewards when customers fail to make payments on
time. So, in addition to incurring late fees, a
penalty APR and damaged credit, cardholders can
also lose reward points and miles when they miss
payments.
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6.
Donate points and miles to charity.
It is commendable to donate to charity, but our
tax laws make it unwise to use points and miles
to do so. Since you did not pay for credit card
rewards, the IRS does not consider their donation
to be tax deductible.
CHARITY
Instead, use your points and miles for the most
valuable rewards possible and donate the money
you saved to the charity of your choice. In this
way, you can still claim the deduction, and your
tax savings will allow you to donate even more.
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Credit card rewards can be simple to earn, but
complicated to spend. By understanding how to
avoid these pitfalls, cardholders can focus on
finding the most rewarding uses for their points
and miles.
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