Once you have paid off your credit card debts, it’s time for your cards to work for you instead of you working for them. In other words, get a card that rewards you for using it. And then use it for everything you possibly can! This is good advice as long as you’re confident you are never again going to carry a balance. Rewards cards typically come with higher interest rates and membership fees, so carrying a balance would be unwise.

But it would also be unwise to pass over the free benefits and cash these programs offer. Since all you have to do is sign up and then spend money as you normally would, it’s a no brainer. Use and abuse credit card rewards programs and you will SAVE BIG. You can put that savings toward a fat down payment on a house or paying cash for a car --or just for fun!

In this chapter, learn to SAVE BIG by:

• Getting the right rewards card for your life.
  
• Choosing a program that gives you maximum flexibility for earning points.
  
• Using points for travel instead of shopping because it’s much more lucrative.
  
• Going to a website that will analyze your usage and tell you exactly which rewards card will serve you best.

Pleasure Points

When credit card companies award you points you can use toward travel, shopping and so on, I call those “Pleasure Points” to distinguish them from Cash Back Cards. The key to making money while spending money is to get a credit card with Pleasure Points you will actually use. My husband used to have a card that earned him points toward a General Motors car. Problem was, he didn’t really want a GM car.

When we got married, I persuaded him to switch to two credit cards that offer fabulous frequent flyer benefits. We were young, hip travelers at the time. Ah, memories… We flew to Europe, Thailand, Chile and Australia using our credit card Pleasure Points.

It was a tremendous deal even though our main rewards card charged a $50 annual fee at the time. Take that Australia trip. We flew business class – woo hoo!—and the two tickets would have cost a fortune if we’d paid cash. Instead we spent about five years saving up rewards points. Let’s crunch the numbers real quick to see how we did:

Trip to Australia
Cash price for 2 tickets: $16,000
5 years of annual fees: $ 250
BIG SAVINGS= $15,750

Gosh, that looks like such a coup now that I see it written down! Just $250 for two business class tickets to Australia! We had a wonderful time. It was a dream trip we couldn’t have justified at the time without credit card Pleasure Points.

Choose a Flexible Program

If you’re going to go for a card that offers Pleasure Points” then make sure the program you choose is ultra flexible. For example, one of my programs allows me to combine my credit card points with several different airlines’ frequent flyer miles. I don’t like credit cards that give you rewards on a single airline, because I worry the airline will go under.

My other rewards program let’s me buy any airline ticket on any airline as long as I have enough points and it’s in the agreed upon price range. I just pay for it with the credit card in question, alert the card company and they reimburse me. That way there’s no muss or fuss about blackout dates or anything like that. It’s not actually a frequent flyer ticket. The credit card company treats me to a regular ticket.

BIG SECRET: Too Many Cards = Too Few Points
To get the most out of rewards cards, it’s best to only have one or two credit cards, because otherwise your rewards are spread out over too many cards and you don’ t build up enough to truly benefit.

Travel Versus Shopping

Debbie S. of New York, a quietly confident person, noticed that credit card companies are often more generous with travel points than shopping points.. She went online and saw that her credit card company charges 55,000 points for an airline ticket to Hong Kong, which has a cash value of $5,000. By contrast, it would cost her more -- 56,132 points-- for a ten megapixel digital camera, even though it’s only worth $280! You can guess what Debbie decided. She took the trip to Hong Kong and paid cash for a camera while she was there! Smart girl.
Pleasure Point Negatives

The main disadvantage of pleasure points is that you are at the mercy of the credit card company. They can change the number of points it takes to go shopping or go somewhere and tell you to go to hell if you complain. The website CardRatings.com says many rewards points are worth less than a penny! Worst case scenario, the card company can cancel the program altogether when times get tight.

Although I’ve noticed many rewards cards no longer charge an annual fee, some still do. When they do, then you have to make sure you spend enough money to earn enough points to make that annual fee worthwhile. My husband and I racked up so many points that we were able to fly to Australia, but if you just want to go to Toledo, then the $250 in annual fees we paid wouldn’t be worth it. Paying cash for the ticket is probably cheaper.

Lastly, you have to be organized to use pleasure points. According to a Harris Interactive poll, 41 percent of people rarely or never cash in their credit card rewards. If you’re a list monster like me, you’ll be fine. I booked those Australia tickets nine months in advance. And I write little notes to remind myself to cash in the shopping points I earn on another credit card. If I forget, they’ll expire.. If you’re not detail-oriented, and you know this about yourself, don’t go with a credit card that rewards you in pleasure points. For you, cash back is better.

Cash Back

Wow! Cash back programs have gotten good. Just now I went online to sites that compare and contrast different rewards cards, and I was amazed. In fact, I might switch to a cash back card. My husband and I don’t travel like we used to because of our two-year-old daughter. We want to be those hipster parents who take our toddler overseas, but we haven’t pulled it off yet. So cash back might be good at this stage in our lives because we can use cash for…anything. If we start traveling again, we can always use cash to buy tickets.

According to one website, I could earn about $4,500 every three years by switching to a cash-back card that fits my spending patterns. (Groceries, drugstores and gas. Ah, the glamour...). In one quick search I saw that most cash back cards give one percent back on general purchases. Don’t settle for a card that pays less than one percent. Better yet, search for cards that give a higher percentage in certain categories that make sense for you. I found one card that offers five percent back on travel, clothing and movie purchases. I also found one that offers five percent back on --you guessed it-- groceries and gas. I’m so psyched that I’m going to go sign up now.

BIG SECRET: Don’t pay extra for a gold card.

A quick online search reveals that the interest rates on gold cards are typically higher and most people don’t take advantage of the services gold cards offers. There was a time when gold cards were prestigious, but now there are platinum and diamond cards, for goodness sake. Choose a points program that fits your life regardless what color it is.

OK, I’m back and I’ve got math to show you.

If you have no credit card debt and don’t carry a balance, you should throw as many of your living expenses as you can on your cash back credit card. Many property management companies even let you pay your rent with a credit card these days. Here’s how much money you can get back if three quarters of your purchases earn one percent back and a quarter earn five percent back.

Cash-back card benefits
Charge $1000 a month: $240 cash back a year
Charge $2500 a month: $600 cash back a year
Charge $5000 a month: $1200 cash back a year

It would be crazy not to go after this free money. All you have to do is spend whatever you normally would and you earn cash back. If you’re enrolled in a program that fits your spending patterns, the money really mounts.

You should know that because of the economic crisis, many credit card companies have been revising their rewards programs. And “revising” always means “reducing,” now doesn’t it? So, review the rewards cards you already have to see if the programs have changed or are no longer worthwhile to you. And check to see if there are other choices that are more generous or a better fit.

Resources for Choosing a Rewards Card

There are several great websites that compare and contrast different credit card reward programs. You actually enter your spending patterns and levels and the websites spit out recommendations for you. Here are the best sites:

• BillShrink.com
  
• CreditCards.com
  
• LowCards.com

BIG TIPS

• Choose a rewards program that fits what you like to do and is ultra-flexible.
  
• Book at least nine months in advance to make the most of travel points.
  
• If you’re not super organized, choose a cash back card.
  
• Try out websites that analyze your spending patterns and recommend a rewards card for you.

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