A Guide to Maximizing Credit and Debit Card Rewards

When used wisely, credit and debit cards offer more than just a convenient way to pay—they can also reward you for your everyday purchases. Here’s how to maximize your rewards effectively.

Understanding Card Rewards Programs

What Are Rewards Programs?

Rewards programs incentivize cardholders by offering cashback, points or miles for using their card for purchases. These rewards accumulate over time and can be redeemed for various benefits like statement credits, gift cards, travel perks and more. They encourage loyalty and higher spending, making them a win-win for both consumers and card issuers.

Types of Rewards

• Cashback: A straightforward reward system where a percentage of your spending, commonly somewhere between 1-5%, is returned to you as a credit to your account. It’s a great option for those who value simplicity and direct savings.
• Points: These offer flexibility as they can often be converted into travel, merchandise or gift cards. However, the value per point can vary, so understanding their conversion rates is crucial.
• Miles: Ideal for frequent travelers, miles allow you to save on flights, upgrades and other travel-related expenses. Some programs even partner with airlines or hotels for enhanced benefits.

Choosing the Right Card for Your Lifestyle

Assessing Spending Habits

Take a close look at your monthly expenses. If you dine out often, a card offering elevated rewards on restaurants is a smart choice. Conversely, someone with a long commute might benefit from a card that rewards gas station purchases. Identifying your spending trends ensures you choose a card that aligns with your lifestyle.

Matching Cards to Categories

Many cards specialize in certain spending categories. For instance, a card offering 5% cashback on groceries can save you hundreds annually if you shop regularly. Additionally, some cards provide flat-rate rewards on all purchases, which can be ideal for those who prefer simplicity. Researching your options ensures you get the best rewards for your specific needs.

Strategies for Earning More Rewards

Maximize Bonus Categories

Some cards offer rotating categories that reward higher rates during specific periods, such as dining during the summer or department stores during the holiday season. Activate these categories through your account portal and plan your purchases accordingly to maximize benefits.

Stacking Rewards

Take advantage of opportunities to combine rewards. For example, shopping through a card issuer’s online portal can earn bonus points, while also using store loyalty programs or coupons adds another layer of savings. This strategy works particularly well for online shopping or travel bookings.

Referral Bonuses

Most credit card companies provide bonus rewards for referring new customers. These bonuses can be substantial, often ranging from $50 to $100 in cashback or thousands of points. Sharing your referral link with friends or family that would also benefit from the card is an easy way to boost your rewards balance without additional spending.

Managing Your Cards Wisely

Avoiding Interest and Fees

Rewards are only worthwhile if you’re not negating them with interest charges or fees. Carrying a balance or missing payments can result in high costs that exceed the value of your rewards. To truly benefit, pay off your card’s balance in full each month and keep an eye on any annual fees to ensure they’re worth the perks.

Staying Organized

With multiple cards, it’s easy to lose track of due dates, spending categories or rewards expirations. Tools like Mint, YNAB (You Need a Budget) or card-specific apps can help you manage your cards effectively.

Staying organized ensures you never miss an opportunity to earn or redeem rewards. If you’re someone that struggles with discipline or organization, multiple cards may not be the best option for you.

Maximizing Redemption Value

Best Ways to Redeem Rewards

To get the most out of your points or miles, focus on high-value redemptions like travel. For example, using miles for international flights often provides greater value than domestic flights. Similarly, cashback is best redeemed as a statement credit or direct deposit to ensure you’re maximizing its purchasing power.

Avoiding Poor Redemption Options

Be cautious about redeeming rewards for merchandise or gift cards, as these options often offer a lower value per point. For example, a gift card redemption might equate to half a cent per point, while travel redemptions can exceed 2 cents per point or more. Stick to redemptions that align with your financial goals.

Debit Card Rewards: Are They Worth It?

How Debit Card Rewards Differ

Unlike credit cards, debit card rewards are less common and can be less lucrative. They typically involve lower earning rates and fewer redemption options. However, they can still provide value for those who prefer to avoid credit or don’t qualify for a rewards credit card.

When Debit Cards Make Sense

Debit card rewards are ideal for individuals who prioritize simplicity or wish to avoid the risk of overspending on credit. They’re also useful for building financial discipline, as they limit spending to available funds while still offering modest rewards.

Pro tip: If you have a need for both a credit and debit card, you can find rewards options for both!

Rewards at OMB Bank

OMB believes in rewarding our customers. That’s why we offer different rewards options.

Stock Rewards Checking

With our OMB Stock Rewards Checking account, you can earn 2.5% back on your debit card purchases that you can then redeem for fractional shares of your favorite stocks! It’s a great way to begin building a stock portfolio by simply using your card.

Rewards Checking

With OMB’s Rewards Checking account, you can earn up to 5% cashback on your monthly debit card purchases up to $10 each month. That’s $120 in yearly savings the easy way.

Common Pitfalls to Avoid

Overspending to Earn Rewards

It’s tempting to spend more to reach reward thresholds, but this can backfire if it leads to unnecessary debt. Spending $50 you wouldn’t have otherwise just to earn a few dollars in rewards isn’t wise. Always balance the cost of earning rewards with your actual financial needs to ensure you’re coming out ahead.

Neglecting Terms and Conditions

Rewards programs often have limitations such as expiration dates, blackout periods or minimum redemption amounts. Regularly reviewing your card’s terms ensures you don’t miss out on your rewards or fall victim to unexpected restrictions.

Staying Updated on Rewards Programs

Monitoring Changes

Rewards programs frequently change their rules, adding or removing benefits based on market trends. Staying informed through email updates, card issuer announcements or financial blogs ensures you’re always aware of the latest opportunities.

By carefully selecting the right cards, adopting smart spending habits and staying informed, you can make the most of your credit and debit card rewards. Whether it’s earning cashback on everyday purchases or redeeming points for a dream vacation, the right approach ensures your cards work as hard as you do.

OMB and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision.