Many of us choose credit cards based on their rewards programs. Rewards rates can be 2% or more of spending, which can translate into hundreds of dollars. But according to a 2019 study by The Harris Poll and Nerdwallet, most of us could get smarter about rewards programs. Here are some of the biggest rewards mistakes people make.
1) Not knowing how much your points/miles are worth
According to the Harris study, less than one in five consumers know the actual average value of a travel rewards point/mile. (Answer: one cent.) Almost half think it’s worth more. And almost one in five people think it’s worth $1 or more—off by 10,000%-plus.
The result? A major let-down that may make you decide rewards aren’t worth it, when they could be.
2) Over- and underestimating sign-up bonuses
Likewise, many of us don’t know the value of sign-up bonuses. A 50,000-point/mile sign-up bonus on average is worth just under two domestic round-trip plane tickets, or about $500. But 15% of the survey’s respondents thought it would buy more, and an equal number thought it wasn’t enough to buy any.
3) Thinking you know more than you do
The study found that Millennials and Gen Z-ers are more likely than other age groups to overestimate sign-up bonuses, point/mile values, and other benefits. At the same time, they were more confident in their knowledge.
4) Believing your card balance has no effect on your rewards
Your credit card balance has no effect on the value of your rewards. But if your balance is so large that you can’t pay it in full each month, the additional fees and interest can erase the value of your rewards.
5) Hoarding your rewards
“Use it or lose it” definitely applies to credit card rewards. Travel rewards are intended to be used on travel. If you don’t spend your rewards, they may get devalued or expire.