CardClub Education

Optimizing Credit Use

Making the Most of Your Rewards Program

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There's no single "right" way to use your credit, but there are plenty of "wrong" ways. Learn how to take maximum advantage of the cards in your quiver, with CardClub.


Most prime and near-prime credit cards offer lucrative rewards programs. The rewards are an incentive offered by credit card companies to encourage frequent card usage, and they come in a wide variety of forms — from simple cash back, to free memberships, travel miles, and other benefits like hotel stays. To fully benefit from what your card has to offer, it's crucial to understand the full scope of any associated reward programs. We’ll walk you through the most common perks and advantages, with a focus on developing a strategy to maximize those rewards.

Types of Credit Card Rewards:

Cash Back

Cards with a cash back rewards program return a percentage of the amount you've spent on the card as cash. They can be applied as a statement credit, direct deposit, or check. Cash back rates typically range from 1% to 5% depending on the card and the type of purchase. They’re the single most-common rewards category.

Tiered Rates

Some cards offer higher cash back rates for specific spending categories like groceries, gas, or travel. If your lifestyle necessitates a lot of predictable spending in a particular category, look for a credit card with a complimentary rewards program. Almost everyone spends money on food, fuel, and travel - but some much more than others.

Rotating Categories

Cards with rotating rewards offer extra-high cash back rates on different categories, much like cards with tiered rates. The difference is, the reward-earning category changes every quarter. You'll need to manually-activate the new category to earn the higher rate, but cards with these type of rewards can be particularly useful for seasonal spenders.


Points are another common form of credit card reward. Conceptually, they’re indistinguishable from cash back — it’s just a simplified unit of measurement. And, every card’s point reward program functions on the same basic principle. Each dollar spent earns a point, and each point has a cash value of one cent.

Some cards (especially retail and co-branded cards) offer points that are redeemable only at specific establishments or for specific products. Others permit more flexibility, allowing points to be redeemed anywhere. However, all cards that offer rewards in the form of points are employing a secondary incentive. In the same way that certain purchase categories earn points at different rates, those points are also worth more when spent on specific categories.

For example, a travel rewards card may offer 3x points on fuel purchases, and make those same points redeemable at a specific airline for 1.5x their original value. In that case, if you spent $5,000 on fuel that year, you’d receive 15,000 points worth either $150 in cash, or $225 in flight credit.

Points programs demand more diligence and effort than cash back programs, but offer savvy and strategic users a chance to earn greater rewards than they would with simple cash back.

Travel Rewards

Credit card rewards get a little tricky when it comes to travel, so we'll discuss it separately.

A plane ticket is the most-common high-value purchase in the world. So, it naturally follows that credit card companies partner with airlines and travel agencies to increase sales. These cards, also known as co-branded airline cards, are an extremely common offering from most major credit companies.

They offer a unique set of rewards and perks tailored for frequent flyers of specific airlines, and those rewards are measured in the form of “miles”, rather than points. These cards not only allow you to accumulate miles at a faster rate, but also offer an array of additional benefits that can make travel more enjoyable and cost-effective.

Types of Miles

The term "miles" can be a bit confusing because they aren't always a straightforward measure of the distance you’ve traveled. There are generally two types: revenue-based, and distance-based.

With Revenue-Based Miles, point earnings are tied to the dollar amount spent on fare, rather than the actual distance traveled. Most U.S.-based airlines have moved towards this system. Some international airlines still award miles based on the actual distance traveled, but this practice has fallen out of popularity in recent years.

Travel Redemption

Miles can be redeemed for airline tickets, and sometimes seat upgrades, extra baggage, or partner airline tickets. But the value of a mile can vary widely depending on how you redeem them, which flights you choose, and availability.

There’s also a host of airline-specific perks that often come with a co-branded airline card. You're often allowed to board earlier than other passengers. Many airline cards offer the first checked bag free, a perk that quickly adds up for frequent travelers or families. Higher-tier cards may offer complimentary or discounted access to the airline's airport lounges. Some cards offer an annual "companion pass" that allows another person to fly with you for free or at a significant discount. And, most travel cards don't charge foreign transaction fees, making them ideal for international travel.

Some co-branded airline cards allow you to transfer miles to other loyalty programs, usually at a 1:1 ratio. However, not all miles are transferable, and it's essential to check the card's terms. Co-branded cards are excellent for brand loyalists but less flexible than general travel cards that allow you to redeem points across a variety of airlines.

Strategies for Maximizing Rewards:

Sign-Up Bonuses

To attract new customers and encourage immediate use, many cards offer a one-time bonus for spending a specific amount within the first few months. These bonuses can come in a variety of forms, like cash back, points, miles, statement credits, or promotional interest rates. The amount of the bonus also fluctuates frequently, as they’re often used to lure customers away from competing cards. Take advantage of them wherever possible, as the bonus often amounts to a year's worth of points.

Card Churning

“Churning” is the practice of signing up for credit cards with large signup bonuses for the sole purpose of obtaining the bonus, immediately canceling the card, and moving on to the next one. The loophole is almost too good to be true, but it still works.

This strategy isn't for everyone, though. For one, opening multiple cards in a short period of time will significantly lower anyone’s credit score. And, churning generates hard inquiries, which take at least two years to fall off your credit report. We don’t recommend doing this if you’re applying for a mortgage, job, apartment, or loan in the near future.

What’s more: it takes an unusual amount of diligence to meet the spending requirements without paying interest. A dollar short, a day late… and the bonus is gone. Paying interest for even a single month could completely eliminate the value of any gains obtained through churning. And, the clincher: most churn-able cards carry an annual fee. You could do everything right, miss the cancellation window by an hour, and all your efforts still go down the drain. If you’re planning on churning multiple cards at once, you must have a system in place for keeping track, and sufficient free income to fund the project.

It’s a tempting prospect - churning out a jet-set life on a backpacker's budget. But, card companies are catching on, actively working to make churning harder, and counting on you to mess it up. If you're not careful, it’s a slippery slope from King Credit to just another pawn in the game. Churning is either a goldmine or a landmine. There’s no middle ground, and it depends entirely on the individual.

Strategic Spending

It almost goes without saying, but using the right card for the right type of purchase is the easiest way to maximize your rewards program. For instance, don’t trade your points on cash back if they’re worth more in travel. Don’t use a co-branded store card outside of that store. Don’t pay for dinner with your gas rewards card. In other words: use common sense, and stay consistent.


Navigating rewards programs can be an exhausting ordeal. Every card is different, and the details of individual programs fluctuate wildly. Rewards cards often come with high APRs, and if you don't pay your balance in full every month, the interest quickly negates any rewards. Many rewards cards also carry steep annual fees, payable upon receipt of the card, turning the chase for rewards into a game of catch-up.

Before applying, make realistic and conservative calculations to determine if you’d earn enough rewards to actually outweigh the fees. Also, determine if your current income can sustain the level of spending required to obtain the rewards in the first place.

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