Yahoo Finance 5 Ways People Misuse Their Travel Rewards Credit Cards
It's no secret that people who frequently travel can get a tremendous amount of value out of their travel rewards credit cards. These rewards can often be worth hundreds of dollars -- when you use your rewards cards the right way. However, if you misuse your travel rewards credit cards, you risk not just missing out on the value they're intended to provide, but in many cases, you could also end up paying more than they are worth.
Here are five ways people misuse their travel rewards credit cards, and how you can make sure you're getting the most out of yours.
[See: Best Credit Cards.]
1. Carrying a Balance
For any type of rewards card, whether it awards travel rewards, hotel, airline or even cash back, it's crucial to pay your balance in full each month during the grace period. Card members who consistently carry balances from month to month, only paying their minimum monthly payments, are also paying interest on the purchases they've made. Considering that a credit card's APR can be as high as 20 percent, your travel rewards card could be costing you more than any rewards it might be offering.
2. Not Using the Card
Many travel rewards credit cards require users to continuously earn or redeem miles or points within a specific amount of time or lose any rewards accrued. The requirement could be a year, or it could be two years, but it's important to keep track of expiration dates and if there is any potential to lose the rewards earned from purchases. If this is the case, be diligent about making sure you use your card regularly until you have a chance to redeem your rewards. Not all card issuers allow you to earn miles, stop using the card completely and still keep those miles indefinitely.
[See: 12 Frugal Ways to Save on Vacation.]
3. Opening New Cards for Bonuses While Carrying Debt
It's a fairly common practice for people who are serious about travel rewards to open new card accounts to take advantage of the sign-up bonuses. Some of these bonuses can be worth hundreds of dollars if you spend a certain amount of money with the card during the designated time frame. However, if you are already in debt and having difficulty paying your bills, opening new card accounts and taking on more debt isn't going to be worth the sign-up bonus, no matter how valuable. In order to get the most value out of travel rewards credit cards, you should pay down your existing debt, which may also help you qualify for much lower interest rates on future cards.
4. Redeeming Rewards for Low Rates
With most travel rewards credit cards, you get the most value if you redeem your miles or points for flights or hotel stays with a specific carrier or chain. Even general travel rewards credit cards typically provide redemption options where your rewards are worth more than other options. If you don't frequently fly a certain airline, and you redeem those miles for gift cards or merchandise, there's a good chance you are getting a much lower rate for each mile. If you can't take advantage of the best redemption opportunities, switch to a rewards credit card where you can.
[See: Best Airline Credit Cards.]
5. Not Researching Other Travel Options
Although it makes sense to think that if you redeem your miles for an award flight, you're getting the best deal, because it's basically free. Unfortunately, this isn't always the case. It's best to research flights and not limit yourself to just one provider to ensure you actually do get the best deal available. If you plan ahead, you can get the best deal for your travel, and you can be sure that when you redeem your rewards you are, in fact, getting the best possible value for each mile or point.
Greg Go is the co-founder of Wise Bread, an award-winning personal finance and credit card education blog, where you can find tips on how to find the best travel credit cards.
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