6 Ways NOT to Spend Your Credit Card Rewards

By Brittany Lyte. Last updated 31 May 2016. 0 comments

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Most credit card rewards go the way of our food scraps — down the drain. But it's not because they aren't valuable. Credit card rewards can fly you to places you couldn't otherwise afford to go. You can even redeem them for free hotel stays and rental cars. Yet many rewards go wasted because cardholders either don't understand how to redeem them or they mistakenly fail to do so by the expiration date. (See also: 7 Biggest Mistakes When Redeeming Credit Card Rewards)

Even if you're one of those card holders who uses their rewards, there's a good chance you could be flubbing it. Not all redemption offers are created equal. In fact, some rewards are far less valuable than others. Read on for our roundup of the worst ways to spend your credit card rewards.

1. Buying Stuff You Don't Actually Want

Redeeming your rewards for gift cards can be a great move — if you use them to purchase items you were going to buy anyway. Otherwise you'd be spending unnecessarily, which is contrary to the concept of a reward. Here's another tip: If you're going to trade in your rewards for a gift card, it's best to do so when the gift card is discounted (usually points are valued at one cent per point, so if you can get a $50 gift card for 4000 points, that’s a good deal).

2. Redeeming Them for Overpriced Merchandise

With sites such as Amazon and eBay, it's easy to buy home goods and electronics for less than the retail price. And since credit card reward programs typically offer these items at an inflated price, redeeming your points or miles for a coffee maker or a digital camera is rarely a smart move. Better option: Get a gift card for Amazon or preferred vendor, and then buy the item at a discount.

3. Opting for a Cash-Out

Some credit card providers let you trade your points or miles for cash. Beware: It’s likely you'll take a big hit on the redemption value. However, it can be better than nothing, if there are no other options (like gift cards) that you would use. It’s better than letting your points expire. Again, look for a minimum one cent per point value.

4. Redeeming Them for Gas Cards

Gas is a major expense that most of us would love to trim down. Even still, don't be so easily romanced by credit card rewards that offer gas card redemptions. Many of these gas cards are tied to annual fees that you wouldn't otherwise pay at the pump. Others will require you to drive miles out of your way to the inconveniently located gas station that services your card, which could end up costing you more money than the gas card is worth. (See also: Best Credit Cards that Offer Gas Bonuses)

5. Gifting Them to a Friend

In life, generosity isn't always rewarded — especially when it comes to your credit card points. If you decide to gift your points to a friend, you can get hit with fees to facilitate the transfer from your account to the other. If it helps, get a gift card instead, or redeem your rewards for whatever it is your friend needs.

6. Hoarding Them

Credit card rewards are only valuable if you use them. And while many people like to hoard as many points as possible in order to redeem a grand prize, this strategy is risky for two reasons.

First, it puts you at risk of ending up empty handed. Many people save their rewards so long that they blow past the expiration date and end up with nothing.

Second, since credit card companies and banks can alter the terms of their rewards programs at any time, the let-them-accumulate strategy could leave you with a load of rewards that have declined in value. That's why many experts advise you to redeem your rewards regularly. (See also: Expert Tips for Redeeming Rewards for Travel)

How do you maximize the value of your credit card rewards points?

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