1. Consumers use credit. This is a lucrative market and there is no shortage of customers.
2. Rewards are an excellent incentive. With so many choices, card issuers must be competitive. As a consumer, when you apply for a credit card, it just makes sense to select one that will reward you when you make your purchases. It’s no accident that the better your credit score, the better the offer. If you have a record of good credit, card issuers want your business. You are a much lower risk and these issuers are eager to make a profit off of your credit card usage. They know you have more choices than consumers with a challenging credit history, so they continually offer new loyalty reward cards to top themselves and their competitors.
3. You have to spend to earn rewards. Card issuers make money off of their interest rate charges. The more you charge, the more you pay. Your rewards – be they points, miles or cash back – are determined by the amount of money you spend using your card. Rewards often serve to drive you to spend more. This is good business for credit card issuers. Annual percentage rates are always much higher than the percentages they offer you for rewards. Essentially, you have to spend money to make money. Despite your best effort to carry no balances, the result is more frequently the opposite. So, for most credit card issuers, the rewards only serve to offset your APR charges by a minuscule amount.
4. Co-branded loyalty reward cards generate more revenue for specific companies. They encourage brand loyalty and establish a relationship between merchant and consumer. Department stores, gas stations, airlines, hotels and a plethora of other businesses are increasingly partnering with Visa, MasterCard, and American Express to reap these advantages. Consumers who already shop with a specific merchant can realize better rewards and incentives by using these co-branded cards.

Despite these facts, you CAN come out ahead with loyalty reward cards. To accomplish this however, you must live within your means. Don’t carry a balance. Don’t max out your card. And don’t buy things simply to earn rewards. It’s just that simple.

Earning, Redeeming and Receiving Your Rewards

You earn credit card rewards two main ways:

• Signing Bonuses

  In a bid to garner your business, most loyalty reward cards now offer a large initial reward when you open a credit card account and spend a specified amount during a finite time-frame. This is in the form of cash back, miles or points. For example a travel rewards card may credit your account 40,000 miles once you purchase $3,000 on their credit card during the first three months that you own the card.

• Everyday Spending

  You must continue making purchases with your card to continue earning rewards. With cash back cards this translates to a percentage of the dollar amount you spend on purchases. For cards that offer points/miles, you earn a set number of points for each dollar you spend. Most points/miles rewards cards offer a 1:1 ratio at a minimum. They also typically offer multiple points for specific categories. For example, you may earn 3 points/miles for all of your travel purchases and 1 point for all other purchases.

Some cards also offer Anniversary Bonuses. At the anniversary of your account opening, they will credit you with a bonus number of points/miles, or reward you with some type of perk, like a free night at a hotel or complimentary tickets to a sporting event. These cards usually charge an annual fee.

Once you earn your rewards, you want to reap the benefits, right? Some cards set thresholds that you must meet before you can redeem your rewards. For example, you may not be able to use your points/miles until you have accumulated 2,500. However, many cards now allow you to redeem their rewards as soon as you earn them. These cards typically let you offset the cost of your purchases with your rewards when you pay your monthly bill.

This brings us to HOW you redeem your rewards. The following options are typical for rewards redemption.

• Statement Credit

• Check

• Merchandise

• Gift Cards

• Charity

• Special Perks

What You Need to Know About Loyalty Reward Cards

Card issuers are in the business of making money. Rewards are set up to further this goal. You can realize lucrative savings, discounts and freebies with rewards cards with dedication and discipline. Awareness of the traps issuers set to make a profit off of you is the first step. Select the card best suited to your buying needs as the best reward cards are the ones suited for you. Use restraint and only purchase what you can afford. And, finally, never carry a balance, as this will inevitably wipe out the savings you earn with your rewards.

Shopping/Restaurants/Entertainment

Your typical rewards card will offer points, miles or cash back for general purchases like shopping, restaurants and entertainment. In many instances, your best earn rate for these categories will be realized when you shop at a card issuer’s online mall/shopping portal. In many instances you don’t even have to use their loyalty reward cards to shop there. Instead, use a card that maximizes rewards and/or perks. A good shopping rewards card comes with additional valuable features like purchase protection and extended warranties.

Example Portals:

• ShopDiscover

• Chase Ultimate Rewards Mall

Travel

Travel loyalty reward cards offer a better rewards earn rate for travel-related purchases, such as airfare, hotel stays, cruises and car rentals. Several of the best reward cards also offer perks associated with travel. This includes complimentary upgrades, flight accident insurance, priority passes, baggage insurance, in-flight purchase discounts, priority check-in and boarding, and concierge services. Many good travel rewards cards do not charge foreign transaction fees either.

Example:

• American Express Premier Rewards Gold Card

  3x earn rate on your points for flights booked directly with the airlines. 2x earn rate on gas and groceries. Points can be used for travel, merchandise, entertainment and gift cards. It offers additional travel benefits, like roadside assistance, rental car insurance and travel accident insurance. This is a charge card, not a credit card, so there is no balance, nor interest rate. It charges a 2.7% foreign transaction fee. The $175 annual fee is waived the first year.

Gas

You don’t need to limit yourself to branded gas cards to reap benefits for your gas purchases. With so many options available, you can realize high earn rates and save at the pump with a major loyalty reward cards. Just look for a higher than 1:1 ratio on gas purchases and check for an annual fee.

Example:

• BankAmericard Cash Rewards Credit Card

  3% cash back on gas and 2% on grocery – eligible purchases capped at a combined $1,500 total each quarter. 1% after that and on other purchases. No Annual fee.

Small Business Loyalty Reward Cards

These credit cards offer rewards targeted to the small business owner, often incorporating several features from other rewards programs. Typical important rewards categories for the business user are office supplies, airfare, gas, hotel stays, and phone and internet services. Other features of value include fraud alerts and tailored spending limits for different authorized users.

Example:

• Chase Ink Cash Business Card

  5% cash back on purchases (up to $25,000 annually) at office supply stores, on cable tv, phone service (mobile and landline) and internet services. 2% cash back on purchases (up to $25,000 annually) at restaurants and gas stations.

Rotating Spending Categories

If you want more variety out of your rewards card, rotating categories may be the answer. These cards change the spending categories that earn the max rewards rate every 3 months.

Example:

• Chase Freedom Cash Back

  For a top credit card reward, get 5% cash back on select purchasing categories that rotate each quarter. For example, from mid-July to mid-September 2014, you earn 5% cash back on purchases at Kohl’s and at gas stations. From mid-September to mid-November, the categories change to Amazon, Zappos and select department stores. The 5% rate only applies to the first $1,500 in combined purchases during each quarter. All other purchases earn unlimited 1% cash back.

Choose and Use Wisely

For the most rewards impact, select the rewards card that offers the best earn rate in the categories that are already important to you. This way you get cash back or earn points/miles for purchases that you already typically make, and this results in smart savings for you.

Points/Miles Valuation

While it’s fairly easy to determine how many points/miles you can earn with your rewards card, figuring out their value is another story. Just because a credit card rewards program offers you multiple points/miles for each dollar you spend, it doesn’t mean that card offers you the best rewards value.

To give you an idea of some of the different valuations, here are some generic points/miles valuations for a few of the card issuers with the best credit card rewards. These valuations are based on “ both the monetary value you get from it as well as the experiential value of its worth to you personally. ” Points valuations can be tricky and ever-changing. The following valuations are meant solely to give you a rough idea of how points vary from one credit card rewards program to another.

• American Express points redeem at an average rate of 1.7 cents per point, when you weigh in all factors. For some things like airline and hotel purchases, point value is only 1 cent.
• Chase points have an average 2 cent redemption rate, when all factors are considered, but the flat rate is about 1 cent per point.
• Citi ThankYou Points redeem at an overall average rate of 1.1 cent, but the value starts much lower than that. As you stockpile more points, the redemption value increases.
• Capital One points/miles typically redeem at about 1 cent.
• Bank of America falls short, redeeming under 1 cent per point in many instances.

Potential Trouble Spots

There are potential pitfalls with any credit card rewards program. Here are a few to be aware of.

• Large Introductory Bonuses
  Don’t spend more than you can or should in order to qualify for a signing rewards bonus.
• Rotating Categories
  This is similar to overspending to earn your signing bonus. Don’t purchase something with your card just because it’s in the current quarter for max rewards. If you have a card that offers its top credit card reward for rotating categories, try to plan your big purchases with these categories in mind. With the right planning, you can save big on expensive items like appliances. Also be sure to register or sign up when required. Many issuers require this every quarter.
• Annual Fees
  These aren’t always bad, but look at the amount you will save with your rewards and compare it to the fee you will be spending each year for your card. For example, if the annual fee is $89 and you earn 3% cash back on gas and grocery purchases that’s capped at $1,500 every quarter, the maximum cash back you can earn is $180, before the rate drops to 1%. That’s a good return as long as you normally spend $6,000 a year on gas and groceries.
• Rewards or Purchase Caps
  Look for caps on the amount of points/miles/cash back you can earn through your credit cards rewards program. 5X miles/points for your grocery purchases might sound wonderful, but if the purchase amount is capped at $2,000 for the year, the maximum 10,000 points/miles may not be worth it, especially if the card has an annual fee and low points/miles valuation.
• Expiring Points/Miles
  This has become far less common, but some issuers still offer points/miles that expire.
• Eligibility
  Some cards require a minimum amount of usage to keep your rewards active. Check whether inactivity or even late payments affect your rewards.
• Balances
  Carrying a balance on your rewards card is a bad idea. The APR will eat up any savings you may earn with cash back, points or miles.
• Thresholds
  It’s fairly common to set a minimum threshold you must reach before you can redeem your rewards points/miles. For example, with Bank of America, you have to earn 2,500 World Points to redeem them for cash or travel. For the purchase of gift cards, you must have at least 3,500 points.

Do Your Research
Before applying for a card with a credit cards rewards program, do your research. Find out its points valuation and carefully read the card’s terms and conditions. This will expose the true value of the rewards and uncover potential pitfalls to be avoided. Do your research to help select the best reward credit card offer.

Credit Card Gaming in a Nutshell

Also referred to as churning, credit card gaming involves the use of multiple loyalty reward cards for the sole purpose of earning rewards. These gamers earn trips, cruises, merchandise, cash and more through numerous points, miles and cash back offers. Essentially, a churner earns intro bonuses and spending rewards, cashes in, and then closes the accounts before incurring any fees or interest rate charges.

Skilled gamers identify a specific goal and then go after it with carefully selected top credit card reward programs to accrue their rewards. Though the goal is typically the accumulation of points/miles/cash, some card holders use the practice to help address their debt. They do so by moving their large balances to Loyalty Reward cards with long introductory 0% APR’s so they can pay down the principal without accruing additional interest rate charges.

How it Works

The most important thing to note about traditional credit card gaming is the avoidance of carrying balances. IT WILL NOT WORK if you don’t pay your credit card balances every month. Winning strategists use their high rewards yielding cards to make eligible purchases for services and products that are a normal part of their budget. They earn the rewards and pay the credit card statement each month.

These are common expenses gamer charge to their loyalty rewards cards to earn points/miles/cash back:

• Utility bills

• Phone bills – landlines and mobile

• Gas

• Groceries

• Dining

• Mortgage payments, car loans, student loans

  Note this is difficult, although there are work-around. It can be expensive via associated fees through a necessary third party vendor, and not all cards and lending companies allow it or even award points/miles/cash back for these expenditures. AmEx is definitely out. For cards that do allow this practice and offer rewards, it can be an effective way to meet the spending threshold for an introductory signing bonus. Everyday spending is typically a wash however, since the fees are often the same or higher than the amount of awards you can earn.

A disciplined and experienced gamer will use these strategies to earn rewards without making foolish expenditures and sinking into debt. Another essential requirement is excellent credit. Clearly, you cannot qualify for multiple loyalty reward cards unless you can demonstrate credit worthiness.

Common Risks

Unfortunately, the typical consumer struggles with debt. This makes credit card gaming a dangerous venture for most. The following are just a few of the important topics and potential issues related to this practice.

• Credit Utilization Ratio
  Your credit utilization ratio measures your credit card spending against your available credit. Churning can increase this rate, detrimentally impacting your credit score. This happens when you spend a lot on multiple cards and then close the accounts. You’re left with a high spending rate and little to no available credit. You need to aim for a CUR below 30%.
• Credit Rating Damage
  A good credit rating is essential in all facets of your life. Credit card gaming has the very real potential of damaging your rating. This can happen if you get in over your head, running up huge balances and missing payment due dates. Your score is further impacted by multiple card applications. Numerous credit inquiries lowers your score. Another red flag is the aggressive use of several new credit cards at once. Issuers are on alert for this type of behavior, recognizing it as a sign of churning. This can lead to termination of your loyalty reward cards and cessation of your relationship with a number of card issuers. What’s more, 10% of your FICO score is impacted by this type of activity.
• Discipline to Pay on Time
  It’s vital that you stay organized and keep track of your cards, their payment due dates and any other pertinent terms and conditions that may impact your credit and your churning goal.
• Flashy Rebate rates
  Select your rewards cards carefully. Don’t be blinded by the promise of a big intro bonus. Strict guidelines often accompany these offers. Carefully inspect all the terms and conditions of each rewards card you select.

Credit Card Gaming is not for Everyone

Though enticing, churning can be chancy and difficult. It’s foolhardy to risk your financial future just to earn a vacation or cash that you plan to blow through. If you want to try your hand at gaming, ensure you have the discipline and organizational skills to follow-through successfully. In the long-term, the impact on your reputation, and the ability to qualify for a car loan and a mortgage are far more important.

• Cash-back: The first example is for a card that comes equipped with a cash back rewards program. If you regularly charge expensive items, you could earn a tidy sum. Let’s say you put $60,000 on the card in one year, and the bank that issued the card gives 1.75 in points for each dollar you spent. (A “point” is one percent.) With a simple math equation, you’ll discover that just over a grand would be yours to play with ($60,000 X 1.75% = $1,050). And that’s for a low point value. Many issuers give five points for each dollar charged when you use the card to pay for such things as dining out and airfare.

If charging such high sums sounds crazy or not doable, think again. It’s amazing the expenses you can charge on your card these days and when using credit cards with rewards you truly can earn money. Not long ago, you couldn’t use a credit card for large, recurring bills like rent and college tuition. But times are changing. Many schools and colleges accept plastic, as are an in-creasing number of property owners. It’s certainly common for tuition to cost over $20,000 per semester, and for monthly rents in high-demand areas to exceed $2,000 per month. Simply by paying your child’s education and your own housing costs using credit cards with rewards could reap enough rewards to cover the cost of a swank weekend vacation in about a year.

For another example, consider what you can get with points transferable for airline travel. The points start accumulating when you begin your relationship with the creditor. Much of your bonus comes from the original number of points you get when you first acquire the card and promise to use it in a specific way.

• Credit Cards with Rewards: Getting Points. Depending on the card, you can earn as many as (and in some cases more than) 100,000 points by charging a mere $3,000 in the initial three months. Those points are worth big money. Typically, that number would translate into about $1,000 or more toward airfare or hotel expenses.

All for what? Paying for the things you can afford. That’s the key, of course. To make sure credit card rewards programs are worth it, and that you’re putting free cash in your pocket and complementary trips in your life, you’ve also got to be dedicated to charging aggressively. To avoid canceling out the benefits of the rewards by paying high interest expenses, you’ll want to do so while also staying out of debt.

Are credit card rewards worth it? I think so and I hope you’re inspired to use credit cards as an enhancement!

• Miles
  Airline miles are the most well-known in this category. However, many airline miles credit cards now allow you to use your miles for other purchases as well. With some card issuers, the miles you earn may only be used for flying or travel-related expenses. Others allow you to redeem your miles the same way most points are used.
• Points
  Rewards Points may be redeemed for merchandise, services, airline miles, other travel rewards and more. With many cards, points can be used like airline or travel miles. Points can also often be used in a similar manner to cash. However, points may be devalued by your credit card issuer.
• Cash Back
  These cash rewards are offered as a percentage of the dollar amount on the purchases you make with your cash back rewards card. Card issuers stipulate which purchases are eligible. The standard in the industry is 1% on most purchases, although you can earn higher rates on specific purchasing categories with certain cards to earn top cash back. Many issuers pay your cash back as a credit against your bill, though with some you can request a check.

What Benefits are Important to You?

A big factor in your decision is your goal. Are you a traveler looking for an affordable vacation or free upgrades and perks on your trip? Are you a shopper who wants to get excellent deals on your purchases? Are you a consumer who just prefers cold hard cash? The answers to these questions will help direct you to the credit card rewards programs that will best meet your specific needs.

Popular Miles/Points Cards – Airline Credit Card Rewards Programs

Airline and travel rewards creditcards typically fall into the Miles or Points categories of Rewards cards. The reward miles/points offered with these cards can be extremely versatile or limited to a specific airline or rewards redemption system.

• Versatile Miles/Points and Transferring
  There are a lot of great rewards cards out there that allow you to earn points or miles and then use them at a number of different airlines for flights and travel perks. The Chase Sapphire Preferred Card supports a 1 to 1 point transfer ratio to United, Korean Airlines, British Airways, Marriott, Hyatt, Priority club and Amtrak. American Express rewards cards let you convert your rewards points to Frequent Flyer miles and redeem them with close to 100 airlines. AmEx Membership Rewards points also transfer to five Frequent Guest programs so you can enjoy luxurious hotel stays worldwide.
• Travel Payback Rewards
  These rewards allow you to earn redeemable miles/points towards your travel purchases on everything you buy. So, if you purchase an airline ticket for $265, a hotel room for $112 and rent a car for $89 with your Capital One Venture Card, you will earn 932 miles. You can then use your miles to offset a bit of the purchase price when you receive your card statement.
  In addition to earning extra miles on your purchases, some travel rewards credit cards also give you a percentage of your miles back when you redeem your miles for travel. Barclaycard Arrival allows you to earn 2 times the miles on all of your purchases, and when you pay for travel on your card, you earn 10% miles back when you redeem your miles for those travel purchases.
• Airline Reward Perks
  As mentioned above, many travel rewards credit cards allow you to redeem your miles or points for non-travel related expense, such as merchandise and gift cards. For example, the American Airlines AAdvantage Card lets redeem your miles for magazine and newspaper subscriptions and gift cards.

Your Own Rewarding Experience

To get the most benefits and the best experience from your credit card rewards card, first identify your goal and then research the top cards in that category. Be it travel, shopping, or cash, there is a myriad of credit card rewards programs to choose from, and the benefits can be quite lucrative.