This post is part of a pro/con series with other bloggers. Make sure to check out their contrasting opinions on this topic which I’ve linked to at the end of this post.
Credit cards seriously scare some people and rightfully so.
If you aren’t on top of your credit cards, you can easily pay double digit interest rates on balances you don’t pay off in full.
However, if you’re a responsible credit card user that pays their bill off in full every month without fail like my wife and I do, credit cards offer some amazing rewards programs you need to be taking advantage of.
Before we get into the awesome rewards programs and why you should absolutely use them, let’s cover the ground rules for using credit rewards programs that you absolute must follow.
Rules Of The Credit Card Rewards Game
In order to participate in credit card rewards programs, you must follow the rules of the game. If you can’t adhere to these rules, don’t bother signing up for rewards credit cards. They’ll cost you more money than the rewards you’ll earn.
You must pay all of your credit card bills off in full every statement period during the grace period.
This means you won’t ever pay a late fee or a penny of interest on the charges you put on your credit card. Usually, having at least a small emergency fund is required to make this work.
You must have a system in place to track when your monthly statements are issued and when your payments are due.
You must use this system without fail to ensure you pay every credit card bill off in full and on time every month to avoid late fees.
Personally, I use a bill paying spreadsheet and check it once a week or twice a month to make sure I don’t miss any bills.
You must have a system for keeping track of rewards and actually use them. Many people sadly earn credit card rewards but never redeem them before they expire.
Don’t let that happen to you. Know the rules of your rewards programs to make sure you use your rewards before they expire. This can also be done easily on a spreadsheet.
Why Credit Card Rewards Programs Are Amazing
Now that we have the rules out of the way, it’s time to realize the awesome power of credit card rewards programs.
Basically, credit card rewards programs are awesome because they give you money for spending money you’d spend anyway. All you have to do is put your purchases on a credit card instead of a debit card or other payment method.
If you’re willing to spend a bit of time mastering the rewards programs, you could take vacations for free like my family does. We’ve taken multiple free cruises thanks to our credit card rewards. More on that later.
Credit Card Rewards Can Be Simple Or Complex
Credit card rewards programs can be as simple or as complex as you’d like. On the simple end, you can easily earn 2% cash back on all of your purchases using a card like the Citi Double Cash credit card which doesn’t even have an annual fee.
Let’s pause and think about that for a minute. Let’s say you normally spend $15,000 per year on purchases you could put on a credit card.
By simply using the Citi Double Cash credit card, you could get $300 back to spend on anything you desire.
If that’s not sweet enough, it gets even better if you’re willing to use multiple credit cards to earn maximum cash back based on the categories you spend in most.
Here’s an example of how much cash back you could earn in a year if you wanted to optimize your cash back by using multiple credit cards.
Using the above combination of cards could earn an additional $335 in cash back per year. However, the Blue Cash Preferred card has a $95 annual fee, so the real additional cash back you’d earn after fees would be $240.
Sign Up Bonuses Can Make Credit Card Rewards Astounding
Credit card companies want you to try out their credit card rewards programs, so they often offer astounding bonuses to entice you to sign up for their cards.
These offers usually require you to spend a certain amount on the card in a few months after opening the card.
For instance, a credit card may offer $500 you can use to offset travel costs you charge to your card if you spend $3,000 in purchases within the first 3 months of opening the card.
If you meet the spending requirement in the time period, you’ll earn a $500 travel statement credit. Additionally, you’ll still earn the normal points you’d earn on the $3,000 you spent.
While some of the cards with these sign up bonuses have no annual fee, other cards may waive the annual fee for the first year or charge you an annual fee if one exists.
Most cards have no annual fee or an annual fee of under $100, but some cards have annual fees of $450 or more.
What’s even better are there are plenty of cards that allow you to earn sign up bonuses, not just a handful. If you have a significant other, both you and your spouse can sign up for your own card, letting you earn the bonus twice.
My wife and I use sign up bonuses to earn thousands of dollars in credit card rewards each year, but we have systems in place to make sure we’re still keeping everything under control.
Check out my list of the best credit card sign up bonuses available this month which I updated every single month with the best deals.
If you decide to earn credit card sign up bonuses, it is super important to keep tight controls on your spending. Never spend more than you usually would to meet a sign up bonus. If you do, it defeats the purpose and the credit card companies win.
Also, make sure you keep track of what cards you have open and when annual fees are due.
If you tried a card that had an introductory year with no annual fee and you find you don’t use the card on a regular basis like you thought you would, cancel the card before the annual fee comes due.
We Use Credit Card Rewards To Cruise For Free
As I mentioned before, my wife and I use our credit card rewards to travel. We have earned plenty of free hotel nights as well as enough cash back and travel statement credits to earn multiple free cruises for our family.
Here’s how my family took a free 5 day Carnival cruise using credit card rewards.
We also took a free 7 day Carnival cruise using credit card rewards, too.
If you’re disciplined with your finances and credit cards like we are, you can do this, too. Just remember, shut it down if things get out of hand. If you have to start paying interest you’re not going to win at the credit card rewards game.
Are Credit Card Rewards Worth It?
Are credit card rewards worth it? Heck yea! But only if you follow the rules. Otherwise, you could dig yourself into a financial nightmare for just a few hundred dollars in rewards.
If you play the game smart like my wife and I do, you could earn thousands of dollars in credit card rewards every year. You can use the rewards for anything you desire, including free travel like we do.
While we think credit card rewards are a no brainer if you can follow the rules, there are others that don’t agree with me. Elizabeth Rehbehn at the MoneyNav blog and Josh Patoka at PeerLoanOnline both disagree.
Check out their thoughts, then let me know which side of the debate you fall on in the comments below.