12 Mistakes You’re Making in Your Quest for Rewards Points
Taking advantage of rewards points — whether through credit cards, airlines or hotels — can be incredibly worthwhile and a great way to pad your pockets.
When used the right way, rewards programs can add up to free money, vacation upgrades and more. But a lot of rewards programs are inconspicuously complicated. If you’re not closely monitoring them, you can lose out on a lot of benefits.
Some rewards programs are so complex that they make you feel like you need a PhD to understand all the fine print. A recent survey from NextAdvisor found that 54 percent of Americans think frequent flyer programs are confusing. Forty-seven percent of people are baffled by hotel loyalty programs and 44 percent can’t figure out credit card rewards.
With any rewards program, it’s easy to make mistakes and to feel like you’re not getting all the perks you signed up for. So how do you navigate such a complex terrain and avoid costly oversights? Here are 12 blunders people make with rewards programs — and tips to help you steer clear of them.
1) You’re Waiting Too Long to Redeem Your Points
This is an easy mistake to make, and it happens more often than a lot of people realize. Every rewards program is different, and if you don’t keep track of expiration dates, you could be losing out on valuable points.
A lot of hotel points expire if they lay dormant for 12 to 18 months. Airline miles are similar; some of them never expire, such as those through Delta Air Lines or JetBlue. But the majority of carriers do have an expiration date on their miles. Both United Airlines and American Airlines’ points expire after 18 months, for instance.
“My biggest mistake was waiting!” said Angela Rozmyn, founder of personal finance blog Tread Lightly, Retire Early. “We’ve had an Alaska Airlines card forever that we use as we accumulate regular points. But I’m finally seeing the light with opening new cards.”
Do your research so that you know the details of your rewards agreement. Stay up to date on which of your rewards expire when, and better yet, sign up for more flexible programs that don’t have an expiration date.
2) You’re Spending More to Get More Rewards
Sometimes the allure of getting more points can become nearly addictive.
It’s easy to get pulled in by the promise of a round-trip flight or a luxury hotel stay. Make sure you’re not spending more than you usually would just because you’re enticed by racking up those points.
Not only is it a bad habit, but it can hurt you financially in the long run.
3) You’re Allowing Interest to Accrue
If spending more means you’re not paying off your card balance in full each month, you’ll be incurring even higher expenses in the form of interest. Spend what you would normally spend — and nothing more.
And if you do end up paying a minimum balance on your credit card, be sure that it’s on a card with the lowest possible interest rate.
4) You’re Thinking All Points Are Equal
This may seem obvious to some people, but not everyone immediately understands that each rewards program varies slightly, and the value of a point can differ significantly from one program to the next.
Think of it like foreign currency. Just like a U.S. dollar doesn’t equal a Canadian dollar, one point doesn’t necessarily equal a point in a different program. Redemption values vary with each rewards program.
While the value of airlines miles is usually pretty straightforward, points systems, such as those which credit cards tend to employ, are more complicated since it depends on what you can redeem for the awards.
5) You Don’t Understand Rewards Vocabulary
To make things even trickier, while typically credit card and hotel programs refer to their rewards as “points” and airline and travel programs call their awards “miles,” that’s not always the case. Some credit cards actually refer to their awards as “miles,” too.
Just be sure that you’re not focusing on how many points you earn. After all, what it comes down to is how you can redeem those points.
6) You’re Not Getting the Most Bang for Your Buck
A lot of people who accumulate points through a credit card instinctively choose the cash-back option when they’re redeeming their points. That’s not always the most lucrative choice.
Often you can use those points for something that’s worth more than the cash, such as frequent flyer miles.
Do your research and find out how far you can go with your points. Some programs might seem promising at first, but they could have an annual fee that kicks in after one year or a high interest rate.
“We made the mistake of trying to make Delta SkyMiles seem worth it,” said Meagan Lewis, who works for an information services company in the St. Louis area. “The points accumulate very slowly, and they don't go as far.”
7) You’re Using Points for Merchandise
A lot of rewards programs will let you purchase goods instead of getting cash back or travel rewards. But buying merchandise is almost always the worst way to use your points.
For one, when you’re using rewards for merchandise, you’re not using your credit card to purchase the items, which means a lost opportunity to accumulate more points. Furthermore, typically rewards goods are priced at their full retail price. In other words, it’s likely you could have found the items for significantly less elsewhere.
So before buying that rice steamer or tool set from your rewards store, do your research and find out how much it would cost you from a brick-and-mortar retailer or online. If what you’re thinking about getting isn’t really a good deal, don’t do it.
8) You’re Disorganized
“Keep good records is my biggest tip,” Nicole Cook, a business owner in Owatonna, Minnesota, told us in an online forum. “You don’t realize you need detailed records for the one or two cards you get when you start — because you’re new, excited and read everything. All of a sudden, you have 10 cards [and you] don’t remember which category or which one has roadside assistance, when you opened it, the cost of the annual fee, when to call to get fees waived/close accounts, etc.”
With so many different plans and myriad rules, it’s easy to lose track of each and every program you sign up for. But if you don’t stay organized, you can end up paying more in annual fees or easily miss out on when you need to take advantage of your bonuses.
Stephanie Kibler, the founder of money management site Poorer Than You, learned the hard way through personal experience. “I managed to completely miss the bonus on one hotel credit card when I was travel-hacking my way to Disney because I had written down the wrong time period for the minimum spend,” she said.
Luckily, a slew of online tools can help you keep track of your rewards programs. AwardWallet and Loyalty Wallet are just a couple among many apps and sites that can help you stay organized.
9) You’ve Turned a Blind Eye to Partner Programs
Maybe you’re trying to book a dream vacation to Zurich, but your frequent flier miles are through United, and the only direct flight available is through Swiss Air. What do you do?
Or, in a separate scenario, what if your chosen airline has restrictions in place, such as blackout dates, that collide with precisely when you want to travel?
Don’t forget that those precious miles you’ve been accumulating can often be used on partner airlines. Research ahead of time to figure out which airlines have an alliance with your carrier. You’ll need to book the flight through the original carrier, but sometimes you’ll get an even better deal on your ticket by using those partners.
Use Google search to find out which airlines are going to your desired destination, and call up your carrier to get the best deal, when possible.
10) You’re Ignoring the Value of Premier Cards
Most premier credit cards have an annual fee, which some people might view as a drawback. But if you use a premier card often and diligently stay on top your points, that fee can end up being negligible.
Some rewards cards offer relatively robust points for travel, restaurants or gas stations. The American Express Premier Rewards Gold card, for instance, has a $195 annual fee (waived the first year), but you get three points for every dollar spent for flights booked directly with an airline. Plus, you get an annual $100 airline fee credit. The Citi ThankYou Premier card similarly offers three points for travel. If you’re a globetrotter, that’s a no-brainer.
With premier cards, be sure to look at where you’ll get the most bang for the buck with your points and decide if those categories are ones that you would take advantage of. Then weigh the pros and cons of paying the annual fee versus what you would likely get back from it. If you use that one card to make most of your purchases, it might just end up being worth the annual fee and more.
11) You’re Not Dropping Duds
It’s especially hard to stay on top of expiration dates and interest rates if you’re enrolled in so many rewards programs that you don’t know what do with them. Every now and then, go through your list of rewards cards and eliminate the duds.
Is there an airlines rewards program that you never end up using or an interest rate on a credit card that just keeps ratcheting up? Take a close look at every rewards card you have and figure out if any of them are just wasting space. Anything that isn’t worth the effort should go by the wayside.
As you eliminate the duds, take care to ensure that none of them will affect your credit score when you cancel them.
12) You’re Not Watching for Changes in Terms
This ties in with keeping organized records, as discussed above. Banks, airlines and other corporate entities are continually changing their terms of service. Yet usually any changes in terms are communicated via snail mail, and if you’re like most people, such fine print gets tossed into the recycle bin before you ever have a chance to read it.
But the fact is, changes to your terms can translate to less cash back or fewer points. That, in turn, can mean much less lucrative returns over the long haul.
So why hang onto a program if it just means wasted space?