Carefully using credit cards can maximize reward points

Hey there, time traveller!
This article was published 24/09/2011 (5320 days ago), so information in it may no longer be current.

Recently, I had an epiphany. Not the kind that will result in me volunteering at the local soup kitchen or nursing injured animals back to life, but rather one that might get me travelling sooner or acquiring small appliances, all for free!

My revelation was that I was not using my credit card enough, meaning that I was potentially leaving tens of thousands of loyalty reward points by the wayside.

I have always been of the view that a credit card should be used for “special” purchases such as a new suit or a dinner out.

A few years ago, I discovered that a certain gas retailer gave loyalty points on one of my frequent-flyer cards, the same ones as one of my credit cards. At that point, I began to obsessively restrict my fill-ups to that chain of gas stations as every time I used that credit card there, combined with that frequent flyer card, I was effectively doubling up on my frequent flyer points. Ay caramba!

But now I have advanced much further.

Recently, I conducted a review of my spending habits and realized that I was using my debit card (for which I get zero loyalty points) when I could have been using my credit card (which does give me points). I figured out if I budgeted properly and set up an automatic payment schedule from my bank account to my credit card, I would be simply altering my mode of payment in exchange for points.

So instead of using my bank card for daily purchases (which has replaced cash for many) I now use my credit card for groceries, dry cleaning, pharmacy purchases and the like. Presto! I am now racking up many more points than if I had been only using my credit card for those “special purchases.”

Now the trick is to figure out where to maximize your reward points so that you, too, can be constantly “doubling up” when using your credit card. Some retailers, of course, have their own loyalty cards that prevent you from centralizing your point accumulation but will get you a free cup of coffee from time to time. What you really want are retailers who offer reward incentives or bonuses on your main loyalty program for using your credit card for purchases at their business.

Often your loyalty card or credit card will have a newsletter or website guiding you to these businesses making it worth your while to study these from time to time .

The other trick is to rearrange some of those automatic monthly withdrawals from your bank account to your credit card such as insurance premiums, club memberships or phone bills, so those payments, too, will qualify for points.

Small business owners might also want to consider using a small business card to purchase their goods and services, which results in points or they could use their personal credit card and then expense these transactions. Getting excited?

In addition, you should ask more and more of your suppliers if they take credit cards for your purchases. Doing a home renovation? Imagine if all of those building supplies went on your credit card? Hello Disney World!

But in the process of accumulating these points it will be important to budget and pay off these purchases in the month they are charged.

John Archer is an investment adviser with RBC Dominion Securities in Montreal. His email is john.archer@rbc. com.

— Postmedia News