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The world of rewards credit cards can often be complicated. Whether you have an arsenal of heavy hitters or are just starting off, it’s always important to know where you stand. The best way to maintain and improve your credit and your rewards strategy is to follow these steps on a regular basis. Here’s an outline of what to do and how often to do it.
Pay Your Statement Balances in Full
This one is the most important. Since 35% of your credit score is based upon late or missed payments, you want to make sure that you don’t miss a payment. Not only will missing a payment hurt your score, but the unpaid amount will accrue interest and become even harder to pay back.
Consider Paying Down Your Balances Before Your Statement Closes
This might seem the same as paying your statement balance in full, but there is a key difference. 30% of your credit score is determined by the amount of money you owe. However, the amount of money you owe is only reported once your statement actually closes. For example, if you spend $1,000 on your credit card, but then you make a payment of $800 a couple days before your statement closes, your statement will only show a balance of $200. This number is what the credit agencies see, and is the number that factors into your score. And since almost a third of your score is determined by the amount of money you owe, you can see fairly drastic changes to your score on a month-to-month basis by using this tactic.
Keep Track of Your Income and Expenses
It can be easy to lose track of your money when you primarily use credit cards. You should always know how much money you have in total, and how much you’ve been spending and how much you’re bringing in. Stay up to date on your net worth by using one of these apps. If you ever find yourself spending outside your means, make a change fast; overspending is the easiest way to start missing payments and critically damaging your credit score, hurting your ability to be approved for other lucrative cards down the road.
Keep Track of Your Earnings and Rewards
One of the best parts about being a credit card enthusiast is all of the points and miles you can accrue over the years. Don’t let them expire or go to waste! Lots of point currencies don’t have an expiration date; Amex Membership Rewards points and Chase Ultimate Rewards points don’t expire as long as you keep your MR or UR accounts open. But currencies such as AAdvantage miles and United miles expire after 18 months of inactivity on your account.
It’s usually easy to get around these expiration dates, sometimes by just transferring miles from one place to another or going through a shopping portal to constitute “activity.” But stay on the safe side and make sure you stay up to date with all of your points and miles balances.
Make Sure You’re Getting Value Out of All Your Cards
The more credit cards you get, the easier it is to lose track of their various benefits and annual fees. Go through your arsenal and figure out which cards you rarely use anymore. If a card doesn’t have an annual fee, there’s no need to cancel it; in fact, canceling could hurt your credit score, since 15% of your score is determined by length of credit history.
If a card does have an annual fee, that doesn’t necessarily mean you need to cancel it. Even if you’re not getting regular use out of a card, trying calling the issuing company to see if it’ll waive the fee for a year. It might even offer a bonus to incentivize you to keep and use the card.
Another option is trying to downgrade an annual fee card to one within the same network that has no annual fee. This way you won’t be stuck having to pay an annual fee, but you also won’t have to lose your history on that line of credit. For example, if you find yourself not getting value out of your $450 annual fee Chase Sapphire Reserve, you can downgrade it to the $0 annual fee Chase Freedom without losing that line of credit.
Even though closing accounts can hurt your score, don’t keep paying annual fees that aren’t worth it for you. Depending on how much other credit history you have, canceling a card can have a fairly modest effect on your score. As for the dormant cards you decide to keep, just make sure that you’re making at least one purchase on each of them about every 6 months so that the card issuer doesn’t cancel your account due to inactivity.
Make Sure You’re Maximizing Your Returns
With just one credit card, you don’t need to think much about when to swipe it. Throw a few more in the mix, and you have to figure out which card to use for your purchases. Your Chase Freedom might only give you 1 point per dollar on all purchases, but in the right quarter of the year, that becomes 5 points per dollar on something like gasoline.
In terms of getting maximum value from your cards, it’s also important to make sure that you’re in a position to earn sign-up bonuses on new cards. Make sure you know the terms of the sign-up bonus when you apply, and ensure that you’re in a financial position to hit that spend requirement. Also stay on top of exactly how long you have to hit the mark; the clock usually starts the moment you’re approved, not when you activate your card after getting it in the mail.
Every Year Or So
Have a Long-Term Plan
When it comes to rewards credit cards, you can never been too on top of things. So every once and a while it’s good to take a look a little further down the road at where you’d like to be in the future. Say you’re a college senior just starting off. You might only have one card now, but what about 6 months from now? Or two years from now? If you plan on applying for several new cards, know your credit score, your approval odds and how those hard credit pulls will affect your credit. Don’t get hindered by caveats like Chase’s 5/24 rule. Know which cards will suit you best as you enter new jobs, new cities and new chapters in your life.
The long-term game plan is what will most help craft your arsenal of credit cards through the years. If you’re able to strategically apply for the right cards over time, you’ll be on the way to earning loads of points year in and year out. However, that isn’t to say that the other items on this checklist aren’t just as important. Every tip listed here will help you stay on top of your credit and thrive in the world of rewards credit cards.
Featured image by Glenn Carstens-Peters via Unsplash.
The American Express Platinum card has some of the best perks out there: cardholders enjoy the best domestic lounge access (Delta SkyClubs, Centurion Lounges, and Priority Pass), a $200 annual airline fee credit as well as up to $200 in Uber credits, and mid-tier elite status at SPG, Marriott, and Hilton. Combined with the 60,000 point welcome offer -- worth $1,140 based on TPG's valuations -- this card is a no-brainer for frequent travelers. Here are 5 reasons you should consider this card, as well as how you can figure out if the $550 annual fee makes sense for you.
- Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
- Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
- 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
- 5X Membership Rewards points on prepaid hotels booked on amextravel.com.
- Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
- Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
- $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
- Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
- $550 annual fee.
- Terms Apply.
- See Rates & Fees