Is Maximizing Credit Card Rewards Worth It?

Credit card rewards: are they a free lunch, a waste of time, or a bit of both? I’ve often thought about this question over the years as I signed up for different credit card reward programs and chase appealing signup bonuses. However, my thinking has changed a bit since getting my first rewards card back in 2012.

On one hand, credit card rewards are wonderful. They are basically a small discount on all of your future spending. And when you add in the signup bonuses, the value of some of these offers can exceed $1,000. But is spending the time to maximize your credit card rewards points actually worth the effort? After all, with all the time you spend chasing 10,000 points here or there, could your time be better spent elsewhere?

In this blog post I will answer these questions by examining when you should consider chasing credit card rewards, when you shouldn’t, and how to set yourself up for these great perks without taking up much of your time. Let’s begin.

When You Should Maximize Credit Card Rewards

Maximizing credit card rewards can be a worthwhile endeavor if you know what you are getting into. Unfortunately, if you do this wrong, you can end up hurting your credit score and going deep into debt. For this reason, I only recommend considering this strategy if you have meet the following criteria:

• You have great credit: Every time you apply for a new credit card, your credit score decreases slightly. This is because “the amount of new credit” is a factor on your credit report that impacts your overall credit score. While this factor only constitutes 10% of your credit score, as Experian states, “opening several new credit accounts in a short period of time indicates greater credit risk.” In other words, opening new cards to chase rewards points will end up harming your credit score. Therefore, if you are going to attempt this strategy, it’s better to wait until you have great credit. Not only will this help you preserve your overall credit when you apply for new cards, but you will also have access to the best rewards cards out there. By starting your credit card maximization journey before you are ready, you may end up decreasing your future rewards potential.
• You are financially disciplined: In addition to having great credit, you should only attempt this strategy if you have financial discipline. This means you are going to pay off your credit card each and every month. You will not carry a balance and you will not pay interest charges. I can tell you right now that no rewards points are worth going into debt and paying 20% for your money. If you haven’t demonstrated financial discipline, then wait until you have before you become a credit card maximizer.
• You travel often: While there are many categories you can use rewards points on, travel is one of the most common. If you don’t travel often recreationally or for work, then getting all of these points/miles may not be as fruitful as you initially imagined. Don’t get me wrong, getting cash back on your cards is still definitely worth it. However, those who really maximize their credit card rewards potential like to travel.
• You don’t have a high income: This might be a bit controversial, but I don’t think chasing credit card rewards is worth it for people who have a high income. What is considered “high income” is debatable, but if I had to guess, if you earn over $100 an hour ($200k a year), then you shouldn’t spend much time on trying to maximize your credit card rewards. Yes, get the right cards setup, but then stop worrying about it and focus on your career instead.
  • My guess is that most high income people can make far more money through work than trying to go after another 100,000 rewards points. While it varies by program, 1 reward point is worth roughly 1 cent. This means that 100,000 points is worth $1,000 and 1 million points is worth $10,000. So even if you can somehow earn 1 million points a year, which is a lot, that’s still only $10,000. If you divide that $10,000 by all the time you spent to get those points, you may realize that your time would be better spent doing something else instead. 
  • Note that high earners will benefit from some of the premium perks offered by luxury credit cards, however, they shouldn’t spend much time getting this setup.
• You are well organized: If you want to go down the credit card reward rabbit hole, then it’s essential that you are well organized. While it’s easy to juggle a few cards, as you apply for more and more programs, it can be a lot to manage. For example, travel blogger and reward maximizer George Papadopoulos has 107 credit cards that he keeps track of across him and his family. While George is on the extreme end of the credit card rewards spectrum, he demonstrates the importance of staying organized to maximize your rewards. George recommends getting a password manager and tracking which programs you are in, when payments are due, and when you will need to cancel your cards (to avoid annual fees). I’m not an expert here, but I recommend George’s blog if you want to dig deeper on this hobby.
• You love deals/rewards: The last thing that you need to have if you want to be a credit card rewards maximizer is a love for deals and rewards. If the idea of free flights and free hotel stays is worth the annoyance of tracking, then this might be the perfect hobby for you. Travel blogger George Papadopoulos is a self-confessed addict when it comes to chasing credit card rewards/miles and so are many in the credit card reward community. If this doesn’t sound like you, then you might want to find a different hobby to chase after.

When it comes to going after credit card rewards and miles, the perks can definitely be worth it. In fact, when a Redditor ranked which side hustles worked the best, maximizing credit card rewards were in his top 3. While I don’t recommend this strategy for everyone, if you are financially disciplined, organized, not high income, have good credit, and love getting deals, then this might be right for you. 

Now that we’ve looked at when you should consider becoming a credit card rewards maximizer, let’s briefly look at when you should not chase credit card rewards.

When You Should *NOT* Maximize Credit Card Rewards

Even if you have many of the attributes listed above (i.e. you’re organized, you have great credit, etc.), there are still some scenarios where trying to maximize your credit card rewards may be the wrong move. Let’s look at those now:

• You need a higher credit score: If you plan on borrowing money anytime in the immediate future, you will want to keep your credit score as high as possible to get the best rate. As a result, you shouldn’t be applying for credit cards, which will decrease your score to some extent. While rewards points are nice, they aren’t as nice as a lower interest rate.
• You have high demands on your time: If you don’t have the time or energy to track payment dates, cancellation dates, and the organization of your points, then you might be better off sitting this one out until you do. While it’s easy to sign up for a few credit cards, managing them is another story altogether. Unless you have the time to do this, you may slip up, miss a payment, and end up owing interest.
  • This is what happened to me once when I thought I had setup autopay on a new card but I hadn’t. I noticed that my first payment didn’t go through on the due date and I was charged interest as a result. Thankfully, I explained the issue to the credit card company and they removed most of the interest charges and fees. This was during a time when I was quite busy in my career and I overlooked this during my signup process.
• You don’t spend much money: If you are someone who doesn’t spend a lot money, then you may make less on your credit card rewards than you think. While sign up bonuses are great, I’d estimate that over 70% of my lifetime credit card rewards have come from my actual spending. Unfortunately, if you don’t spend a lot of money, then you won’t earn much in rewards. More importantly, if you sign up for a bunch of credit cards and then don’t use them, they may end up getting shut down and taken off your credit report. This is why it’s generally recommend to charge something on each of your cards every so often so that they don’t get shut down. This allows you to increase your average account age which improves your overall credit score.
• You’re in financial trouble: Much like those who are financially undisciplined, if you’re in financial trouble, signing up for rewards programs probably isn’t what you need right now. While some of the signup bonuses can provide temporarily relief, if you end up falling further behind, a credit card will only make things worse. My philosophy is to not add risk to your financial life when things are already risky. This is especially true when it comes to credit cards.

While playing the credit card rewards game can be beneficial, it’s not for everyone in every circumstance. This is especially true if you are extremely busy, in financial trouble, or need to keep a high credit score.

So far I’ve examined credit card rewards only in their most extreme form. I’m talking about the people who have 10+ cards to milk every point and mile they can out of the system. But is there a better way? What if you could get most of the benefits of credit card reward programs for a fraction of the costs? Let’s look at that now.

A Better Way: The Set It and Forget It Approach

The best way to get credit card rewards is set it and forget it. Once you’ve gotten your few signup bonuses and have a great card for your most common purchase categories (e.g. dining, travel, groceries, etc.), then you can put your rewards on autopilot. As long as you are paying off your credit card balance every month, the monthly upkeep on this strategy is quite low. All you have to do is know which card to use in which situation and then not worry about it anymore. You’ve gotten most of the benefits of credit card rewards programs with a fraction of the cost.

Of course, this strategy won’t work forever. Your spending priorities may change and the annual fees on your credit cards may change as well. For example, I used to have a popular travel rewards card with a hefty fee, but as more people signed up for the card, the perks declined. I won’t tell you what card it is, but I’ll give you a hint: when the exclusive airport lounge is more crowded than the rest of the airport, you know it’s time to move on.

And that’s what I did. I downgraded to a different card and haven’t looked back. Will I sign up for more rewards cards in the future? Probably. However, for now I am trying to keep my credit score high in case I ever decide to buy a house. Until then, I will be using my set it and forget it approach to credit card rewards and focus my efforts where I can make the biggest impact. I hope you agree with me and follow suit.

Happy rewarding and thank you for reading!

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