Maximizing Your Credit Card Rewards: What You Need to Know

At O1ne Mortgage, we prioritize consumer credit and finance education to help you make the best financial decisions. While rewards credit cards can offer great value for your everyday purchases, it’s important to understand which transactions won’t earn you cash back, rewards points, or miles. Here’s a comprehensive guide to help you navigate the exclusions and maximize your rewards.

Cash Advances

Taking a cash advance means borrowing against your credit limit and withdrawing money at an ATM or using a convenience check sent by your credit card issuer. These transactions come with a cash advance fee and a higher interest rate, with no grace period. This means you could be charged interest even if you pay off your balance before the end of the month. Additionally, cash advances and cash equivalent transactions like wire transfers and peer-to-peer money transfers do not earn rewards.

Balance Transfers

While balance transfers can help you save on interest by moving a balance from one credit card to another, they do not earn rewards. However, taking advantage of a 0% promotional intro offer can give you 12 to 21 months to pay off your balance without being charged any interest. Keep in mind that balance transfers typically come with a fee of 3% to 5% of the transfer amount, so ensure you’ll save on interest before making the move.

Fees

Credit card fees, such as those for cash advances, balance transfers, or late payments, do not earn rewards. These fees can also erode the value of the rewards you do earn. Recurring fees like an annual fee should be weighed against the potential rewards you can earn. Consider whether the rewards benefits outweigh the costs of any fees you pay.

Interest Charges

Interest charges accrue when you carry a balance from month to month and do not earn rewards. Like fees, interest charges can lower the value of the rewards you earn. To maximize your rewards, aim to pay your balance in full each month to avoid interest charges.

Insurance Premiums

Insurance premiums are a significant expense for many families, but they may not earn rewards on your credit card. Before paying your next insurance premium with your credit card, check the list of exclusions to see whether your purchase qualifies for rewards.

Taxes and Government Fees

Using your credit card for taxes or fees paid to the government may incur a convenience fee, and some credit cards do not offer rewards on these transactions. Using another payment method that doesn’t charge fees is usually a better option for these transactions.

Gift Cards and Prepaid Cards

Gift cards and prepaid cards can be convenient gifts or budgeting tools, but some credit card issuers consider them cash equivalent transactions. As such, these purchases won’t earn rewards.

Purchases Above the Earning Cap

Some credit cards offer higher rewards on certain purchases, but only up to a certain amount. For example, you may earn 5% back on travel purchases capped at $5,000 annually. Once you hit the earning cap, further purchases in the same category may not accrue rewards or may only earn at the base rate, often just 1%. Review your rewards program terms to understand whether you earn rewards after hitting the earning cap.

Purchases Outside the Bonus Categories

Bonus category purchases earn rewards at a higher rate, but purchases outside these categories may not earn rewards at all or may only earn at the base rate, which might be just 1%. Some purchases may not be categorized as rewards-earning depending on how the merchant handles the transaction. For instance, you may miss out on bonus rewards if the merchant uses a third party to process or submit your transaction. Make a mental note to avoid this specific merchant for future bonus rewards purchases.

Purchases Made With Points

Once you’ve accumulated enough rewards, you can redeem them for cash back, travel, gift cards, merchandise, and more. However, using points to pay for a purchase may not earn additional rewards, even if the purchase would typically qualify for rewards. Weigh whether it makes more sense to use your rewards or to make the purchase using your credit card as usual and save your points for a future redemption.

Returned Purchases

Returning a purchase for a refund to your credit card may result in those rewards being deducted from your rewards balance. If you’ve already redeemed rewards earned from the purchase you’re returning, it could lead to a negative rewards balance. To keep your rewards, consider opting for a store card or gift card instead of a refund to your credit card.

The Bottom Line

While most credit card issuers don’t offer rewards on cash advances, balance transfers, fees, and interest, other exclusions vary by card issuer. Review your credit card’s rewards guide to learn which transactions may not qualify for rewards or may not earn at the bonus rate.

If you’re shopping for a new rewards credit card, you typically need good to excellent credit to qualify for the best rewards credit cards. Check your credit score before you start shopping around to see where you stand. This way, you can narrow your search to the credit cards that fit your credit profile—or take time to improve your credit—and apply for your best match.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. Our team is here to help you navigate your financial journey and make the best decisions for your future.