Is There a Wrong Way to Use Your Credit Card Rewards?

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Credit card rewards can be a fantastic way to get cash back, travel miles, or other fun perks. But here's the thing: While these rewards may seem like "free money," there are good and bad ways to use them.

Here are some of the wrong ways to use credit card rewards, and what to do instead.

Using credit card rewards to justify overspending

One of the most common mistakes people make with credit card rewards is overspending in the name of racking up points or cash back. Did you know that last year, the average credit card debt was $6,360?

If you're spending more than you can afford just to get points, especially if you don't pay off your balance in full each month, the interest you accrue could easily outpace any rewards benefits. In this scenario, your goal of earning rewards actually becomes counterproductive, as you would end up paying more in interest and fees than you would gain in rewards.

Pro tip: Only charge what you can pay off each month so you avoid carrying a balance and losing your whatever perceived rewards benefit you're "gaining." If you need a break from high interest, explore our favorite 0% APR credit cards to get an introductory 0% APR for 15 months, or even longer.

Redeeming rewards too soon

Credit card rewards are fun, no doubt about that, and many people therefore use their rewards soon after they become available (even if better rewards are available later). The problem is that early redemption can lead to suboptimal benefits. For example, using points for gift cards would likely offer a lesser return than waiting, earning more points, and then redeeming them for travel.

Pro tip: Always check the value of your points or miles before redeeming them. Opt for redemptions that maximize value, such as travel or cash back.

Ignoring rewards expiration dates

Yes, some rewards expire. If you're not keeping track of when your points or miles need to be used, you could lose them. This is especially important with certain airline or hotel rewards programs, which often have expiration dates.

Pro tip: Make sure to double check the terms of your rewards programs and even set calendar reminders so your rewards remain viable and don't expire before you can use them.

Letting rewards dictate where and how you shop

Finally, another mistake happens when people let their rewards program influence how or where they shop. For example, it's not unheard of for some people to shop at specific stores or buy certain items they may not really need to earn more points with a particular card. This can lead to unnecessary purchases that would not align with your otherwise smart spending habits.

Pro tip: Stick to your regular spending practices, and don't let rewards programs tempt you into making purchases you would not otherwise make.

The bottom line is that while credit card rewards programs are usually pretty great, keep your eye on the ball, namely, see these rewards for what they are -- an adjunct to your credit card purchases, not the main attraction.

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