September 8, 2016

If you are like us, you look for ways to stretch the value of dollars you spend. One obvious way to stretch the value of our dollar is to buy frequently used items when they are on sale. News paper ads, email blasts and in-store advertising are a few ways we learn about bargains.

Another process used by ourselves and many others is through the use of credit card benefits. Saving money by using credit card reward points makes financial sense to 58% of us, according to a recently conducted study by the American Institute of CPAs (AICPA).

However, the study also found that only 15% of the respondents paid for all or part of their trip with reward points compared with 14% who say the cost of a trip they have taken resulted in a credit card balance that could not be paid off by their next statement. In addition, 14% of all Americans have suffered negative financial consequences from their vacation travel, with 12% carrying a balance or paying interest on their credit card, 3% missing a payment or being charged a late fee and 2% going over their spending limit. Not good!

So what is the takeaway from this study?

1. Don't overspend to earn travel rewards. Have a budget to live within. The savings you earned could evaporate because of interest and fees you incur by going over budget.
2. Look for cards that fit your needs. What is most important to you? Be sure to answer that question before applying for a card. Flexibility to transfer points between companies is important to us. Others feel the cash-back at the end of a term is more important because the cash is a defined discount to the price paid. Waiver of foreign transaction fees, insurance coverage, and other features are important items to understand before making a final decision.
3. Look for cards with big sign-up bonuses. Opening too many credit cards in a short period of time could negatively impact your credit score. Open only those cards you intend to use. Don't forget....first year waiver of the annual fee could be a costly benefit if the charges in future years negate the benefits of using the card. But, don't get carried away by overspending to meet the minimum spends to qualify for the bonus points offered.
4. Use technology to track your benefits. AwardWallet.com is an example of using technology to track your rewards and notify you of changes. RewardExpert.com helps members craft a strategy using points and miles to get where you want to go. These are just two interesting ways to help you manage credit card rewards.

Travel is wonderful. Credit cards are terrific ways to pay for vacations. Rewards are valuable and should be used whenever possible. Technology is there to help. But the bottom line is.....Spend Wisely!!