Making the most out of your debt: Credit card reward points!

For many people, relying on credit is just a fact of life. I wish I could sit here and tell you that I have the luxury of only using my credit cards in order to build up my credit profile; however, that is simply not the case. Every once in awhile an expense (whether big or small) will unexpectedly pop up into my life, and I will be caught without any free cash flow to cover it at that moment. It is times like these that I am so thankful to have my credit cards to get me out of a bind. In some of these situations paying a little bit of interest is by far preferable to foregoing payment on that unexpected expense, or missing out on a great opportunity (ie: your car breaks down and if you do not pay to fix it you will have no way to get to work; or, you win free concert tickets but need to pay for transportation). 

One of the best ways to make myself feel better after a big credit card purchase is by taking a look at my statement, and seeing all of the great rewards points that I have accrued. It can really help to take away the sting of an upcoming interest expense! If you are able to get your score into the good and excellent ranges (see my post on credit scores), you will be eligible for some of the top credit cards available, and it's these cards that will provide the best rewards packages to cardholders. 

To demonstrate this concept, I will share a personal story: At the end of the Spring 2013 semester, I realized that, because the accounting department completely screwed me, I would have to pay for an online class that, had things worked out as originally planned, would have been paid for by my graduate assistantship at Lehigh. There was no good time in the upcoming Fall semester to take the class, so I absolutely had to enroll over the summer, and with such short notice, I didn't have the $2000 in cash to fork over for tuition. 

After taking a good look at my finances I decided that I could reasonably (and responsibly!) open up a new credit card to use to pay my tuition. I did a lot of research, and in the end settled on a card that I had been pre-approved for. It was the Citi Thank You Preferred card which, at the time, was offering 20,000 bonus "ThankYou Points" after $1500 in card purchases within 3 months of account opening. 

Here's where the story gets really awesome: 20,000 bonus points translated into a value of $200 worth of gift cards. By paying my tuition with the card (and thus spending more than $1500 in the first three months), I received my 20k bonus points. And due to the point structure on the card, I also received an additional point for every dollar spent on the card. When all was said and done, I paid for my tuition (an expense that I absolutely had to incur. I needed to take that class!) without accruing any interest because of a 0% intro apr feature, and I was rewarded with approximately $250 in gift cards (to stores that I got to chose amongst many options such as: Bloomingdales, Nordstrom, Brooks Bros, iTunes, etc). It was a total win-win!!!

There are a number of considerations when choosing a rewards card. Check out the video below, or this blog post, to learn about the three big categories of rewards programs: points, miles, and cash back. Another awesome resource when trying to pick a new credit card is creditcards.com. Here you will be able to search through available cards in a number of ways, such as: by type of card (low interest, balance transfers, 0% apr, rewards program, etc.), or by credit quality (excellent, good, fair, bad, or no credit at all). 

Now that I have opened your eyes to the intoxicating world of credit rewards, I want to leave you with a few words of caution. Credit card rewards can legitimately be addicting. It is not uncommon for people to get so wrapped up in the introductory deals that they begin to haphazardly open new accounts, reap the benefits of the introductory points, and then close them before moving on to the next rewards program venture. This can and will have a negative effect on your credit score. Do yourself a favor and pick two or three rewards cards that work the best with your lifestyle and shopping habits, and then stick with them. 

Good luck and happy card hunting!!