You have to think of a credit card as a way for someone else to make money off your purchases. If you’re paying off the balance every month, they aren’t doing too hot. If you aren’t using the card too much, they aren’t making much money. So, they have to find ways to keep you involved in the use of the card. One way to do that is to use rewards programs. However, not all are the same.
#1 — First off, what is “no cap?”
No caps on points earnings means that you can earn as many points as you want on the card that you are using. It’s a very smart advertising tactic. I mean, if you can just earn and earn, then you can plan to use the points on certain things that you really want to save up for.
However, there are a couple things to consider. First, you might have a hard time using those points, there may be restrictions on the points and their usage, or there may be some ways that you are simply not allowed to use the points.
If you think of travel rewards, many cards have blackout dates and restrictions that keep you from using the points. You might forget enough times that you keep spending and the company keeps making more money. You might also not be able to use too many of them at one time. This will keep you using the card, and it will make it hard for you to use them all at once (thus making the payoff easier for them to stomach.)
#2 — They expire too
Not all points expire on all cards, but they DO expire for some cards. That’s just the way that it is. You have to read the fine print and find out if there is an expiration date on your points. There may be expiration dates on certain points and not on others. It takes some research on your part to make sure you know the terms of the card. That’s kind of a huge deal.
#3 — Sometimes they don’t
There are cards that have no caps and no expiration dates. That’s REALLY good, but then you have to go back to point #1. There are probably restrictions on the points. So, the company has a much easier time handling dealing out all those points or paying their affiliates for the points you use.
You have to be smart about this and not easily be lured in by “no caps and no restrictions.” Don’t believe that until you read it in the fine print or you have a person tell you that over the phone or submit it to you in writing. That might sound kind of intense, but it’s either that or being disappointed that you didn’t get what you thought you would get.
#4 — What are restrictions?
Restrictions are anything that makes it harder for you to use the points you have. In some cases it is a limit on the amount of money you can save on something. Sometimes, it is a blackout date for travel, or it is a limit that you can only use regional air carriers as opposed to the major carriers. You might even find that you can only use your points on certain items in a company’s “marketplace.” You could see a huge catalog, but you’ll only be able to get a fraction of that stuff.
You could easily end up in a position where you have tons of points that you literally can do nothing with. They become useless, you write off the program, and then you end up not enjoying the benefits of the card. Now you’re just paying interest to the company for nothing.
#5 — What do you do to make sure you are getting a good deal?
Well, it’s all here. You have to read the fine print, and you have to read it very carefully. You can’t just read the fine print about getting the points. You also have to read the fine print about redeeming the points. As we’ve said, you may have all the points in the world and very few ways to redeem them because you might have limits on redemption or usage. If there are blackout dates for travel, restrictions, or monetary on limits on how much you can spend, then you can be in for a real downer.
#6 — What do I do to get a good deal?
Well, you need to get cards that target the things you want. Just because a card offers points, that does not mean that they have things that you want. If you get a card that is for travel points, but you never travel, you’re not going to start traveling all of the sudden. You’ve really got to be sold on the points you’re getting and have a plan to use them. If you travel, find a travel rewards card with terms you like. If you want to get Christmas and birthday presents, then you need to find a card with a rewards program that features all kinds of merchandise in a catalog format. Whatever you REALLY need, that’s the kind of card you get. Don’t just get a card because the rewards sound cool (but you really don’t care about them that much.) You won’t all of the sudden get interested in Bass Pro Shops just because you’re getting points for their store. You get the idea.
#7 — Do I have to be this diligent all the time?
Yes. IF you’re not, then, at the very least, you’re just wasting your interest payments and getting nothing back. At the worst, you’re getting ripped off and you don’t realize it. That’s not a good place to be in.
Do the research.
Read all the fine print.
Better safe than sorry.