How to “hack” rewards credit cards and get the most from your card

Do you have a rewards credit card? If so, this post is for you.

A recent study by the Canadian Bankers Association revealed that 72% of Canadians have a credit card and that 82% of cardholders prioritize the rewards associated with the card.

However, many aren’t taking full advantage of their rewards. Below, I’ll share some of the best “hacks” you can use to get the most from your rewards credit cards.

Benefits of a rewards credit card

Unlike cash or debit transactions, using a rewards credit card to pay for things offers benefits, such as:

• Cashback on transactions
• Air miles you can use for travel
• Hotel points you can use for accommodations
• Exclusive discounts or access to member’s-only areas and pricing
• Added insurance or warranty on purchases

A rewards credit card can really help you save money, offsetting the ever-increasing costs of groceries, fuel, and other living expenses.

Additionally, using a credit card responsibly by maintaining a low balance (or none) and making your payments on time can help you build your credit score. As your credit score improves, you may get offers for cards with better rewards and receive lower interest rates on loans, among other benefits.

6 tips to get the most from your rewards credit cards

Are you ready to learn how to “hack” your rewards card? Reading through your card’s fine print, you’ll often find a treasure trove of perks and benefits in addition to its primary rewards.

Here are the best tips to get the most from your card.

1. Use the right card for the right category

Although there are some general rewards cards that offer a set amount of points or cashback on purchases, the majority of rewards cards tend to be niche-specific.

For example, many Canadian gas stations offer credit cards that allow consumers to save a few cents per litre when purchasing fuel at one of their branded gas stations. While these cards may offer a small amount of cashback for other everyday purchases, you’ll get the most cashback when using the card for fuel.

Similarly, airline-affiliated credit cards offer maximum points for flight and travel-related expenses but may offer fewer points for groceries or fuel.

If you have multiple rewards credit cards, make sure that you’re using the right card for the right category. This will allow you to earn the maximum benefits and cashback for the key spending categories the card was designed for.

2. Take advantage of referral bonuses

Want to get free money? Many credit cards offer referral bonuses when you invite a friend or family member to sign up for a credit card through your customized link. Some cards offer up to $100 or more for each successful signup.

Usually, these benefits are capped at three to five bonuses per year. But if you can get five $100 referrals, you’ve just earned $500 for sending a link to people who were already interested in applying for a credit card.

3. Redeem your air miles and hotel points

This tip primarily applies to hotel, flight, and travel rewards credit cards. Unlike cards that operate on a simple cashback system, these cards offer rewards in the form of points or air miles, which can be exchanged for stays at hotels, vehicle rentals, or air travel.

While these points can be exchanged for a certain cash value and applied against your card’s balance, their cash value is typically lower than if you were to spend your points on a plane ticket or hotel room.

For example, a travel rewards card might allow you to exchange your 100,000 points for a $500 plane ticket, but if you were to redeem the points for their cash value, they may only be worth $350.

4. Discounts and perks from partner brands

Certain cards allow you to take advantage of exclusive discounts when you shop with partner brands. This is often the case with credit cards offered by retail stores, which usually have sister companies that fall under the same conglomerate company.

Another example of this would be a travel card that rewards cardholders with access to members-only airport lounges.

5. Cash in on insurance and warranty perks

Some rewards credit cards offer additional insurance or extended warranties on purchases. For example, some American Express credit cards offer free travel insurance when you use the card for travel-related expenses. This could allow you to refund a plane ticket, replace a lost or stolen phone, or help you pay for overseas medical expenses.

Likewise, some cards also offer complimentary warranties on electronics and other items purchased with the card. For instance, if a laptop breaks shortly after being purchased by the card, you may still be able to get it refunded or replaced, even if the manufacturer’s or store’s warranty no longer applies.

6. Reach your sign-up bonus

One of the easiest ways, by far, to get free money is to reach a credit card’s sign-up bonus. Many cards offer incentives for spending a certain amount of money within a given period of time. If you meet the spending requirements by the deadline, you may be rewarded with free points, air miles, or cash back that can be redeemed for cold, hard cash.

Use your rewards card responsibly

Rewards credit cards can help save money on everyday purchases by allowing you to earn cash back, take advantage of cardholder discounts, and get cash rewards in the form of sign-up and referral bonuses.

However, it’s critical that you use these cards responsibly.

Don’t fall into the trap of spending more money than you have. Otherwise, the interest you’ll pay on your credit card balance can far outweigh the benefits you receive, ultimately leading to you losing money.

The best way to avoid this trap is to make a habit of paying your credit card off in full at the end of each month before the next billing cycle begins. No matter how large your available spending limit is, you should still stay within your monthly spending budget.

Need help setting a budget for yourself? Check out this list of Canada’s best budgeting apps next!

Written for Daily Hive by Christopher Liew, a CFA charterholder, former financial advisor, and the creator of Wealth Awesome.