Better Budgeting: Maximizing Your Credit Card Rewards

Posted: 30 May 2011 04:00 AM PDT

In the world of personal finance, we often think that credit cards are evil. However, like so many other items in personal finance, how you use your different money tools can make a big difference. Before you decide to avoid credit cards altogether, consider the benefits of making a plan to maximize your credit card rewards. You might find that such a plan can lead to better budgeting.

photo credit: staticjana

Racking Up the Rewards Points

One of the best strategies you can use is to rack up the rewards points by making major purchases with your credit card. Whether you have cash back rewards, or whether you have airline miles, you can get more rewards when you plan to buy big ticket items with your credit card.

The key is to have a plan. Using your rewards credit card to make large purchases before you have the money saved up can be counter-productive. The interest you pay will negate the value of the rewards you end up with. Instead, save up your money, as you had planned, and then make the purchase with your rewards card. Pay off the balance quickly, avoiding interest charges.

Another way you can build up rewards points is to use your credit card for regular purchases that you already have budgeted in. Think about how much you spend on groceries, gas, and other expenses. Make those purchases with your rewards credit card. Your points will add up. Make sure, though, that you stay within your allotted budget so that you aren't building up debt. The idea is to build up your rewards points so that you get free stuff — not pay interest. Be sure to stick to your budget and avoid buying things just because you want a few more rewards points.

Special Rewards Programs

Another plan is to consider where you do your shopping, and consider what special programs can help you boost your rewards. Some credit cards, like the Shoppers Optimum card, offer special bonus points. With the Shoppers Optimum card, for example, you can get 25 points for use in store, for every dollar you spend at Shoppers Drug Mart. If you shop there regularly, you can rack up points to regularly receive in-store credit.

There are similar programs offered by airlines and other providers of goods and services. If you have a certain loyalty, you can take advantage of that by using a specific card. This can be a great way to earn points for rewards that you are more likely to use. Of course, you have to be judicious about your spending, and make sure that you have a plan. You don't want your rewards card purchases to break your budget and tie you to debt.

Bottom Line

You really can use credit cards to your advantage. The key is to have a plan to use them within your budget. As with all your spending, it is important that you think about your purchases, and have a purpose for what you are buying. Don't make purchases just to get the reward points. Instead, use a rewards credit card to make purchases already in your budget. That way you can maximize your rewards points, and reap the benefits of planned spending.

Janet writes for Credit, Eh, a blog about responsible credit use and personal finance. You can follow Janet on Twitter: @CreditCardsCA.