How to Make the Most of Rewards Credit Cards - NerdWallet (2024)

FAQs

What is the smartest way to use credit card points? ›

Credit card points (e.g., Chase Ultimate Rewards®, American Express Membership Rewards, etc.) are flexible because they can be used in many ways. The best ways to use these points is often to transfer them to airlines or hotels or use them in lieu of cash when booking travel directly from credit card's travel portal.

Always Make Payments on Time

One of the most essential rules to owning a credit card is paying bills on time. A single late payment within a year of on-time payments might not seem to be much, but it could be a slippery slope that leads to debt and low credit scores and it will impact your credit.

To earn boosted points on your credit card, you'll need to maximize bonus category spending, earn any available welcome bonus and take advantage of promotional offers. To get the most value from your points, redeem them for high-value options like travel or points transfers to airline and hotel partners.

You can raise your credit score 100 points in 30 days by disputing errors on your credit report, paying off past-due accounts, and lowering your credit card utilization. Creditors typically report updated information monthly, so it is possible to improve your score by 100 points in 30 days.

Key takeaways. Cash back credit cards are generally the better choice if you want to earn simple rewards on your regular purchases. A points or miles card may be a better option if you travel often or want to start earning travel rewards on your purchases.

Cash-back credit cards typically offer better value when the redemption options on a points card don't appeal to you. If a points card offers cash-back options at all, it may offer cash back at a lower value than other redemption options.

To improve your credit score using a credit card, make on-time payments, pay off your balance in full each month if possible, keep your card utilization under 30%, avoid applying for too many cards in a short period and don't close accounts that cost nothing to keep open.

According to cardholder reports, Bank of America uses a 2/3/4 rule: You can only be approved for two new cards within a 30-day period, three cards within a 12-month period and four cards within a 24-month period.

What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.

What is the golden rule of credit cards? ›

Pay Off Your Balance

The golden rule of credit card usage is to do everything you can to pay off your entire balance each month. If you can do this, you won't be charged any interest.

You can maximize rewards by charging all your purchases to your credit card. Rewards cards offer either a set number of points/miles or a percentage of cash back on every dollar spent. So the more you charge, the greater your rewards.

Credit card churning is the process of opening cards for the sole purpose of earning welcome bonuses or other benefits. Usually, it involves closing cards after the bonus posts to your account and before the next annual fee is charged.

You can maximize cash back from your credit card by using one of the best cash back credit cards on the market for as many of your everyday purchases as possible. In the meantime, you'll also want to avoid carrying a balance so you won't have to pay interest on your purchases.

Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.