Warning: Don't use credit cards just to earn points

By Aaron Gilchrist - bio | email
Posted by Phil Riggan - email

RICHMOND, VA (WWBT) -  A lot of credit cards now offer bonus miles, or reward points, or even cash, everytime you charge on them.

Sounds like a great deal, but some experts say there are a few things to keep in mind.

More and more people are stepping up their credit card use just to rack up points, that they can then use to make purchases.

Great idea, but you have to be careful.

Tracy Lobdell is making her spending money go a little further by making her American Express card a points-making machine.

"Right now they're offering double points back on grocery purchases and gasoline purchases," Lobdell said.  "Right now I'm spending a lot of money in those two areas, so it works to my advantage."

And Tracy isn't alone, this swipe and earn philosophy is becoming trendy across the country.

"Some statistic says that 85% of American households have at least one credit card with rewards programs," said Jim Randel, author of "The Skinny on Credit Cards."  He says you can reap the rewards if you know how to play your cards right.

"One of the things about rewards cards is to be very, very careful that you don't spend money that you would not have otherwise spent in order to get some points or some reward or some miles," Randel said.

"I'm not going out making purchases just to accumulate points.  What I am doing is I'm making my purchases on this particular card, but they're purchases I would have made anyway."

You also have to pay close attention to exactly what you're being rewarded for.  To make sure the math adds up in your favor.  And if you're using a card with anything more than a nominal annual fee and higher than a standard APR, you're not using the card intelligently.

"These credit card companies aren't doing this because they're nice folks.  They may or may not be nice folks, but they're doing it to encourage you to use your card maybe more than you otherwise would," Randel said.

Randel also says if you're just paying your minimum payment every month, you're just taking money out of one pocket and putting it in the other.

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