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    Racking Up the Rewards

    Monday, January 24th, 2011 at 7:21 PM | Banking, Saving, Spending

    Rewards points are certainly not new. Nearly every major credit card, bank or airline has their own form of currency called miles, rewards, points or something else. Companies “reward” you to build customer loyalty and return business for simply using their company’s credit card or purchasing their company’s product.  However, with some forethought and a few minor changes in your habits, you can convert your rewards points into cash.

    Spend a Dollar to Save a Penny
    Let’s be clear here. Spending a dollar to make a fraction of a dollar isn’t usually a good strategy. However, if you already must purchase a product why not benefit a little from it.

    We do our best to maximize our rewards and usually end up with about $1000 a year in cash.  We put this bonus in our replacement fund which we use each year for trips and vacations.  Not a bad starting point.

    Rewards Defined
    There are many types of rewards programs but we prefer a simple program. We earn points for using our bank’s check card or credit card. Since both these are provided by our bank we earn points that can be used to purchase (overpriced) things, or redeemable for cash rewards. My points, my business points and my wife’s points, all pile up and once or twice a year we cash them all in for a nice little bonus. If you don’t already have rewards points, check with your bank or credit card company to see what type of rewards they offer.

    We don’t like rewards that lock us into using one product/company or service. For example southwest credit cards rack up mileage, which you can use to purchase tickets. This is great, but unless you travel a lot, it really won’t add much padding to your wallet. In addition, you are subject to blackout dates and other restrictions in some cases.

    Also, other company programs such as gas cards or other store cards require you make purchases at their store. In most cases we shop deals and buy our necessities at several locations. So locking us into one store or brand would actually cost us more, which would defeat the purpose of earning rewards.

    How to Earn More Points
    Well the simple answer is just to use your credit card rather than cash or check. Are you still writing checks? With every purchase you make try to use your plastic purchasing power.

    Credit vs Check Card
    Many rewards programs earn you more points for using your credit card, rather than your check card. So if you are on the fence, and not sure if you should use a credit or check card, go with the credit card. Just make sure to pay off your balances each month (the interest charged will more than outweigh any rewards points you may accumulate).

    Business or Reimbursed Expenses
    Have a small business? Add your business cards to your rewards program also. For many businesses paying with plastic is simple, and can really provide a nice shot in the arm for your rewards balance.  Do you purchase things for your employer that you get reimbursed for? Use plastic! As an added bonus, any rewards points you earn usually are earned individually. This means you get the reward check personally. Consult your tax professional, but many times they can remain unclaimed and tax free.

    Dining Out
    Ever had trouble figuring our how to split up your dinner out with friends. Well next time, whip our your visa and pay for the entire group. Have your friends just write you a check, paypal you or pay you cash for their portion. You will rack up some more rewards. Once you start thinking this way, you will be surprised how easily you can shift you purchases to maximize your rewards.

    We hope you are tracking your expenses the easy way. If you are, take another look at your monthly bills. Which companies offer you plastic payment options? Can you pay your mortgage with a credit or check card? What about utilities and other bills?

    Reward Pitfalls
    There are few things to watch as you navigate the new land of rewards.

    Annual Program Fees
    Initially I remember being charged a program fee to have a rewards account. It was $19 a year, and you could use rewards points to pay it. However, now that we have a “better” account at the bank, they waive the rewards program fees. So it’s free. Ask your bank about their program fee to see how you can get it as a free benefit. And if you have to pay it, use your rewards points to do so.

    Credit Card Minimums and Fees
    There are some merchants our there that don’t know the rules. They make things difficult for those that do. Next time you see a minimum purchase, charge for using credit cards or some hybrid, fight the fees. There a many ways not to get charged minimums and fees.

    Talking Point: Do you have any rewards tricks up your sleeve? Any programs or company rewards that you have had good success with?

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