Watch out for this sneaky trick that limits your credit card rewards
If your credit card has a rewards program, read the fine print on the card offer carefully.
Sometimes, a card's rewards program looks like a great deal since it appears at first glance to offer a higher percentage of cash back or points for a specific type of spending that you do often. But watch out for one particular sneaky trick that could net you fewer rewards overall.
► The Daily Money: Get our latest personal finance stories in your inbox
Does your credit card limit your rewards?
There are many credit card rewards programs that offer a very generous amount of cash back rewards for specific purchases, such as 5% or 6% cash back on a spending category like groceries or gas. However, it's important to look at the fine print to see if there's a limit on the amount of spending you can earn this cash back on.
Learn more: Best credit cards of 2023
For example, the card may offer the bonus on spending up to $2,500. And once you've hit that point, you earn just 1% on your purchases in that category. If you spend a lot more than $2,500, you might be better off with a different card that allows you to earn cash back on all the spending you do.
Say, for example, that you spend $15,000 per year in the bonus category. If you use a card that pays 2% back on the entire amount, you end up with $300 cash back over the year from those purchases. But if you earn 5% on $2,500, then get only 1% back on the rest, you earn $125 from the 5% bonus – on the remaining $12,500 you spent, you only earn $125 in additional bonus rewards, for a total of $250.
In this case, the limit on your bonus rewards makes the card that appears to offer fewer rewards the better deal for you. If you want only one card, opt for the 2% cash back card in this scenario.
The other option? Get the card with higher rewards on a limited amount of spending, and keep that limit in mind. Use that card for your first $2,500 in the bonus category, then switch to a different card. This approach is the best way to maximize the total rewards you earn, but requires that you manage multiple cards, which you may not want to do.
Whether you're looking for several rewards cards that you can use strategically or one great card for all your purchases, the bottom line is that you should understand all the details of the rewards program – including any limits on your ability to earn bonus rewards.
By learning the intricacies of what each card offers, you can find the best credit card – or combination of cards – for your spending needs.
Top credit card wipes out interest until 2023
Offer from the Motley Fool: If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you'll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Ally is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ethereum. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
