Don’t Be Fooled! Watch Out For These 5 Credit Card Rewards Tricks!

credit card tricks to watch out forI’ve been exploring many different credit card rewards programs and have been learning how different credit card companies operate.

Why have I been exploring them?

I’ve been signing up for different credit cards to earn the sign up bonuses credit cards offer, along with the typical credit card rewards, and don’t want to get screwed by some fine print.

Most companies have pretty simple rewards programs and reward redemption options.

However, other credit card companies use tricks to try to prevent you from earning or redeeming the maximum amount of points.

Below are just some of the many tricks that credit card companies might use to keep you from earning and redeeming the most rewards possible under their programs.

Credit Card Trick #1 – Require Signing Up For Bonus Rewards

Many credit card companies require you to sign up for bonus rewards categories in order to prevent you from getting the maximum amount of rewards.

If you don’t remember to sign up for the bonus categories in a particular quarter, you will only get the simple base credit card rewards for your purchases.

Credit cards that use this trick include the popular Chase Freedom card. Luckily, Chase sends you reminder emails and will even send you reminder texts if you sign up for your bonus rewards.

I’ve never missed signing up for my bonus 4% cash back (to earn a total of 5% cash back) in the past, but if life got extremely busy I could see someone forgetting to sign up for their bonus cash back.

To avoid this, set up a quarterly reminder on your cell phone or calendar to make sure you always get your bonus cash back.

Credit Card Trick #2 – Rewards Can Only Be Redeemed in $50 Increments

I recently fell victim to this trick. I signed up for a credit card to earn a sign up bonus and found out that I could only redeem rewards in $50 increments. Luckily I was only $2.50 in rewards ($250 in spending) away from the next $50 increment so it didn’t cause a huge headache for me.

Credit cards can limit how you can redeem your rewards and at what increments you can redeem them at. Some companies will only allow you to cash out in $20 or $50 increments while others will allow you to redeem your rewards in any amount you’d like.

Some credit card companies will allow you to get a check or a statement credit, while other credit cards will only allow you to redeem your rewards for travel or gift cards. Most every credit card has different rules.

To make sure you don’t fall victim to this trick, make sure to read all of the literature you can find about the credit card rewards program you are signing up for.

Most cards should give you at least some information about their program before you sign up, but if you can’t find it in the application, search the issuer’s website or just use Google to find the information.

Credit Card Trick #3 – Annual Rewards Limits for Some or All Categories

Some credit cards will limit to the amount of rewards you can earn in any given year. They can limit your general cash back rewards or they can limit your cash back in bonus spending categories.

When I compared the American Express Blue Cash Preferred and Blue Cash Everyday credit cards I made sure to mention the bonus category limit. People abused the 6% cash back at grocery stores, so the credit card companies responded by imposing limits on bonus categories.

Chase Freedom and most rotating 5% cash back category credit cards (Discover It is another) limit the bonus categories to $1,500 of spending per quarter in the bonus categories.

If they didn’t, people would abuse the system and could potentially threaten the profit margins of the credit card companies. I’m not advocating for the credit card companies to make money, but that’s why they do it.

Another example of limiting rewards is the Citi Dividend Platinum Select credit card. At the time I signed up for the credit card, it limited rewards earned to $300 per year. If you spent more money thinking you were going to get even more rewards, you could end up with a nasty surprise.

To avoid falling victim to this trick, make sure you reread the information about the credit card rewards program you found in the trick above.

Credit Card Trick #4 – Tempting You To Spend More

Credit cards create programs to reward you for your spending. Sadly, many people end up spending more money than they would have otherwise, solely to earn these rewards. This is especially true when it comes to earning credit card sign up bonuses.

In order to make sure credit card rewards are working for you, and not the other way around, you need to have tight control of your spending. Never charge anything on a credit card that you wouldn’t have paid cash for today.

Only view rewards as an extra bonus to your everyday spending. Never spend extra money simply to earn a few more points or earn a bonus.

Overspending on your credit card to earn rewards ends up in you paying interest and fees to the credit card companies which will completely wipe out any rewards you earn. Don’t do it.

Credit Card Trick #5 – Luring You In With Waived Annual Fees

Many of the fancier credit cards that offer some of the best perks come with annual fees. Fortunately, most credit cards will waive the annual fee the first year to get you in the door. You essentially get to test out the card for free for a year to see if it is worth the extra benefits the annual fee will cost you.

However, many people forget about the annual fee and a year passes by quickly. One day, you look at your bill and notice a $95 annual fee charged to your account. Most people think it is too late to cancel and simply pay the fee.

If the card provides more value than the fee costs you, then you should keep the card. However, if you realize the fee costs more than the benefits you get, you should cancel before the annual fee hit. Simply set a reminder on your calendar or cell phone so you can cancel before your free year is up.

Even if you’ve already been charged the annual fee, most credit cards will reverse it if you can and ask within a certain number of days from your anniversary. Most cards will give you 30 days or charge you a prorated annual fee if you call to cancel after the fee is charged.

That way you won’t be stuck paying the whole annual fee, just part of it, if you can’t get it waived.

How To Avoid The Tricks Credit Card Companies Use

The best way to avoid these tricks is to read all of the details of the credit card offers you sign up for and the respective credit card reward programs. If you read all of the details you’ll catch all of these small restrictions and tricks and can properly plan for how to get the most out of your rewards.

You can avoid the credit card offers that seem awesome but actually suck in reality due to these restrictions. Read the fine print and you’ll know what you’re really getting into. I always read the fine print, which allowed me to plan for the $50 increment reward redemption issue above.

What tricks have you seen credit card companies use to restrict your credit card rewards? Anything I should add to the list to warn others about? Share your stories in the comments below!

P.S. If you’re interested in comparing the best sign up bonus credit cards or best 0% balance transfer credit cards, make sure to check out the lists I curated.

Photo by: Images of Money Text added by: Lance Cothern

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Comments

  1. Interesting. Luckily I’ve never chosen a credit card with any weird redemption thing like that.

  2. Justin @ The Family Finances says:

    Yep, always read the fine print. My credit card of choice (US Bank Cash+ Visa) recently changed their rewards redemption process. They used to give you a $25 Visa card whenever you redeemed $100 or more in rewards. However, now the extra $25 is limited to once per calendar year, which is irritating.

  3. I tend to go after the frequent flier miles and hotel points. There are less tricks, but they do have bonuses that you must sign up for to qualify. Trying to earn extra miles or a bonus you have to view it similar to income. You need to pay attention to all the details!

  4. Mileage cards do this now too but in a different way. “Mileage inflation”, where an airline makes it nearly impossible to get a flight for that baseline 25,000 mile price is very prevalent in Delta now. I have an Amex Skymiles card which I gladly pay for because I a) love Amex and b) fly to family in Atlanta all the time and c) love the free checked bags but I’m looking at switching to a different Amex rewards card, like the Starwood Preferred Guest since the mileage rewards are making the Delta card not worth my money.

  5. This is a very interesting topic to talk bout, Lance. I’m so glad that you did not only expose the tricks but as well as gave tips on how to avoid them.

  6. I didn’t know about these, Lance. I’m just so glad I got to read this post.

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