Just because you’re on a budget doesn’t mean you can’t take advantage of ways to maximize your credit card points. The key is to avoid making unnecessary purchases in search of rewards. And, sometimes, instead of purchases, you can actually gain points while paying your monthly expenses and debts.

Many credit card companies incentivize customers by dangling time-limited offers. For example, with the CapitalOne Venture Rewards Credit Card, if you spend $3,000 on purchases within three months of opening the account, you can earn 50,000 miles. After this initial period, you can continue to earn 2 times the miles on every purchase – and there is no limit on the miles.

With the DiscoverIT Cashback Match, all of your cash back earnings for the first year are matched dollar-for-dollar. Also, you can earn 5% cash back at such establishments as gas stations, grocery stores, and wholesale clubs, and you can also earn 1% cash back (unlimited) for other types of purchases.

However, in some cases, payments can also be categorized as purchases. So, how can you accrue points while also using your card to make payments? A few suggestions are listed below.

Pay Your Mortgage/Rent

Some mortgage companies allow homeowners to make mortgage payments via credit cards. But not all lenders accept this form of payment. If your company doesn’t, you can use third-party services like Plastiq to pay your mortgage using your credit card. Typically, there is 2.5% fee to use Plastiq. This method is popular because you can quickly and easily use the company’s website or mobile app to make mortgage and other types of payments when credit cards are not accepted.  However, Plastiq no longer supports VISA mortgage payments.

Pay Your Car Loan

Next to your mortgage or rent, your car loan is usually your largest recurring expense. Making your monthly car payments on your credit card is another way to maximize your credit card points. Also, depending on your loan balance (and your credit card balance), if the interest rate  on your car loan is higher than the interest rate on your credit card, you might want to think about transferring the auto’s balance to your credit card. Be advised that most credit card companies will charge a fee for the transfer.

Pay the IRS

Most Americans get a tax refund from the Internal Revenue Service. However, if you owe taxes, the IRS recommends that you use a credit card (or get a loan) to pay your tax bill as soon as possible to avoid interest and fees.  Whether you pay immediately or choose a monthly payment plan, you can use your credit card to make payments – although there is a small fee (usually 1.87% to 1.97%).

Pay Insurance Premiums

Insurance premiums are another hefty expense that you have to pay anyway. Using your credit card can help you gain points while insuring your vehicles and property.

Pay Tuition/Student Loans

A survey by CreditCards.com reveals that 85% of public and private colleges in the U.S. accept credit card payments. However, 57% of these schools charge a fee – which is typically 2.62%.  Among families that use credit cards to pay tuition expenses, the average amount is $4,443.

Also, students with the DiscoverIT Card for College Students receive a $20 credit each year (for up to 5 years) that they have at least a 3.0 GPA.

You can also gain points by using your credit card to make your monthly student loan payment.

Other Factors

Before deciding to use your credit card to make payments in any of these scenarios, weigh the value of credit card points to be gained versus the fees that you might be charged for these transactions.

Don’t forget that there’s a delicate balance between accruing points and going over the desired credit utilization ratio. Ideally, you should only use 30% of your credit card balance. Once you reach 50% utilization, your credit score will decrease – and it will continue to decrease as you get closer to your limit. Large payments like mortgages and tuition can definitely increase your utilization ratio.

Another consideration is the fact that the higher your credit card balance, the higher your monthly interest charges will be. Is the value of your points greater than these monthly charges and the annual cardholder fee?

Also, the closer you get to your credit limit, the higher the danger that you might accidentally go over the limit, resulting in over the limit fees – which can also increase your interest rate.

While credit card points are nice, getting out of debt should always be your top priority. If you don’t pay your entire balance off each month, these rewards pale in comparison to the monthly interest you’re paying. If you’re carrying a balance on more than one credit card, decide which card to pay off first, and then create a financial plan to achieve that goal. And if your debt is close to spiraling out of control, consider meeting with a credit counselor for free.

Leave a Reply

Your email address will not be published. Required fields are marked *