10 cash back credit card mistakes you need to avoid
Almost half of American adults (49%) hold a cash back credit card, according to a 2019 survey from CreditCards.com.
But that same research reveals that we donât alwaysÂ make the most of card rewards.
About 88% of cash back card holders redeemed their rewards over the past year, which suggests some consumers either hoarded their cash or just let it sit unused.
Whatâs a cash back lover not to do? Here are 10 common cash back mistakes to avoid â along with a few tips for squeezing every dollar from those rewards.
10 common cash back credit card mistakes
- Not finding the right card that best suits your real life
- Saving rewards for too long or not cashing them in strategically
- Neglecting to register for those quarterly bonus categories
- Not using rebate coupons and shopping portals to boost cash back
- Being dazzled by sign-up bonuses
- Ignoring spending caps
- Carelessly using cash back cards for ‘autopay‘
- Youâre not avoiding foreign transaction fees
- Carrying a balance on your card
- Sticking with the same old card without shopping new options
1. Youâre not finding the card that best suits your lifestyle
âWith cash back cards, there are so many flavors and options,â said Marc Bellanger, senior director of financial services for Merkle, a marketing firm for the financial services industry.
And depending on your lifestyle and where you spend money, there may be a card where you earn more, he added.
The secret: Tally up how much youâre spending in various categories such as travel, dining, groceries, etc., said Julie Pukas, head of U.S. bankcard and merchant solutions for TD Bank. Her advice: âReally understand what you are really looking for and where you are spending.â
You can also maximize your cash back earnings by shifting (not increasing) some of your everyday spending to the right card.
If you spend a generous amount of your paycheck on groceries, maybe a card that offers an extra bonus for purchases at supermarkets is what you need.
If you don’t eat out much, a card that offers an extra bonus on restaurants might not be worth your attention.
And if you are willing to use your card everywhere. but don’t want to spend time figuring out what card to use on every purchase, perhaps a flat-rate cash back card is the way to go.
The other factor in your equation: annual fees. âUsing a no-fee card is a win-win,â said Zach Honig, editor-at-large at The Points Guy. And some of the best cash back cards have no annual fee.Chase Freedom Flexâ orÂ Chase Freedom UnlimitedÂ®Â card, you accumulate cash back benefitsÂ worth about 1% to 1.5%.
But if you bank those rewards and redeem them for travel through one of theÂ Chase Sapphire cards, you can get an extra bonus worth 25% to 50% of your points.
extra bonuses on specific categoriesÂ year-round, others increase yourÂ cash back in rotating categoriesÂ â which change quarterly â if you register for them online each quarter.
In some cases, such as with someÂ ChaseÂ orÂ DiscoverÂ cards, this can quintuple your cash rewards.
âIf youâre not activating those quarterly bonuses, thatâs a mistake,â Honig said. Itâs also a good time to note the new spending categories, so youâre using the card that gives the most for your purchases.
Ibotta), coupon codes and shopping portals (such as Rakuten and Upromise) to stack extra savings on top of cash back rewards, said Brian Preston, CFP, managing principal for Abound Wealth and host of The Money Guy ShowÂ podcast.
If you can pile up cash back bonuses, portal rebates and coupon codes, âthatâs the trifecta,â Preston said.
Interested in mastering the art of rewards stacking? See â3 ways to stack your rewards at the gas stationâ and âHow to stack rewards to save big on purchases.â
Costco Anywhere VisaÂ® Card by Citi offers 4% back on up to $7,000 in eligible gas purchases (then it’s 1%) every year.cash back card for billsÂ is a great way to hit spending thresholds and rack up cash rewards.
âEssentially, itâs a 2% off coupon,â said Preston.
But that doesnât mean you have to put bills on autopilot, said Honig.
After frequently finding small erroneous charges on bills, Honig has learned that âit makes sense to review everythingâ â and use the cards to pay electronically withoutÂ putting bills on automatic.
Also, if bills are larger than expected (and too much for your credit line), that autopay could max out your card. Or the payment could even be denied.
Any resulting penalty fees might also cancel any hard-earned cash back on your card.
foreign transaction fees, some cash back cards still have them, said Honig.
Foreign transaction fees generally add 3% to your purchases made abroad, and you donât have to be a high-flyer to get hit with them.
âIf you make purchases [from websites or companies] outside the U.S., itâs something to keep an eye out for,â he added.
Easy hack:Â If you plan to use your cash back card while traveling outside the U.S. or at foreign websites, consider signing up for aÂ card that doesnât charge foreign transaction fees.
42% of Americans donât pay off card billsÂ in full every month, according to the American Bankers Association.
Thatâs a losing game.
TheÂ average APR on cash back cards is about 1.3% monthly, so if your cash back card is paying 1%, youâre leaking money.
And if youâre getting 2%, youâre barely breaking even.
Want to get all the juice from your cash back card? Spend only what you can afford to pay each month.
If you need a card you can occasionally revolve, shop for a card that includes aÂ 0% APRÂ promotional offer.
switching cards doesnât have to sink your credit as long as you do it correctly.
If youâre looking at switching cash back cards (and closing one), said Daraius Dubash, co-founder ofÂ MillionMileSecrets, make sure youâve cashed out all your rewards before you close the account.
See related:Â How cash back credit cards work