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Shopping for “needs” is one thing, but we all know how huge sales can convince us to stock up on “wants.” You know how it goes–you head to the store to pick up bread and milk only to come home with a new coffeemaker. It’s human nature to fall for a good deal, so you shouldn’t be too hard on yourself.
Not surprisingly, the same story can apply when it comes to earning rewards. While rewards credit cards offer points and miles in exchange for spending, it can be easy to fall into the trap of spending more to rack up more points.
Unfortunately, overspending to earn rewards never makes any sense, and that’s particularly true if you wind up carrying a balance on your credit card.
How to Know When the Points Are Worth It
So, how can you tell if pursuing points and miles is worth the effort?
According to Matt Schulz, chief credit analyst with LendingTree, you have to understand your own goals and spending habits before you can know if pursuing points and miles is worth it.
For example, do you prefer cash back or points and miles? Do you prefer flying or road trips? Are you loyal to a certain hotel chain or airline? Finally, do you have any specific goals for your rewards earnings?
Schulz says all of these questions can help you decide whether pursuing points and miles is worth the trouble. After all, there’s no reason to earn airline miles if you’re fearful of flying, nor should you bother with hotel points if you rarely stay in hotels.
In the meantime, it’s important to understand that all points and miles are not equal–and often, not even close.
“It’s easy to get blinded by that big 100,000 point welcome bonus, but the truth is that you need to look into exactly what those points will get you before you apply,” says Schulz.
As an example, the analyst points to the fact that hotel points are rarely as valuable as airline miles, and that all points can have different values depending on how you redeem them.
“The more you can know about the value of those points, the better off you’ll be, so do your homework on the rewards program’s website before you dive in,” he says.
In the meantime, you also have to understand the cost associated with pursuing points and miles. A card with no annual fee has the potential to leave you slightly ahead due to the fact you didn’t have to pay for it. However, cards with annual fees are often well worth the expense if they come with valuable perks you can use, or if you earn a lot more in rewards than the fee.
“Also, make sure you know how much you have to spend on your new credit card in order to get that sign-up bonus,” says Schulz. “Those bonuses can be amazing, but overspending to get them is just a recipe for trouble.”
Most importantly, it almost never makes sense to carry a balance on a rewards credit card due to the high APRs they charge. And if you feel you’re prone to carrying a balance, you should probably steer clear of credit cards altogether.
5 Ways to Maximize Rewards without Going Overboard
Think debt can’t happen to you? Think again. Recent credit card debt statistics show Americans currently owe around $804 billion on their credit cards, and the national average unpaid balance is approximately $6,569.
However, if you want to earn more points and miles without abusing the power of rewards, here are five tips that can help.
Use Your Card for Everyday Purchases
Schulz says people often just think of using credit cards for big purchases, but that using cards for everyday spending can help you boost rewards earning potential. For example, make sure you’re using your credit card for gas, groceries, streaming services and miscellaneous purchases you make throughout the month.
Pay Bills with Plastic
In the meantime, make sure to check for other bills you can pay with a credit card, including ones you wouldn’t normally think of. You may be able to pay for your health insurance with a credit card, or for your gas or electric bill. The more bills you can pay with plastic, the more points or miles you’ll earn over time. Just be sure you check for extra fees that may be charged for paying with a credit card instead of directly pulling from your account.
Pick the Right Rewards Credit Card
Also make sure you select a card that lines up well with your spending habits.
“If you spend a lot on groceries, consider a card that gives bonus cash back or points for that type of spending,” says Schulz. “The same goes for gas, dining, travel and even streaming.”
If you don’t want to worry about bonus categories, consider a card that offers a high flat rate of rewards across multiple categories.
Monitor Your Budget
Schulz also points out how important it is to use a credit card alongside a monthly budget. After all, a monthly budget can help you get a handle on how much you spend each month and what you spend it on, he says.
This information can help you figure out which rewards credit card works best for your goals, but it can also help you understand how much you should be spending on your card each month.
“That really matters, especially if you’re chasing credit card rewards because sign-up bonuses typically come with a minimum required spend,” says Schulz. “If you can’t comfortably afford to spend the minimum required amount, you probably shouldn’t get the card.”
Pay for Group Meals (But Make Sure You Get Reimbursed)
Another strategy involves paying for purchases for other people, then making sure you get reimbursed. This is made much easier now that people can send money to each other with ease using services like Apple Cash or Venmo.
Schulz points to the example of offering to pay for meals with a group of friends or relatives and getting reimbursed by those with you. However, he says there’s risk involved since you won’t end up “ahead” with rewards unless you’re actually paid back.
“Make sure that you trust the folks involved before you do it.”
This article originally appeared on Credit.com and has been republished here with permission.