Credit Card Rewards: How to Earn and Redeem Them Wisely


If you've been racking up credit card rewards, summer is the perfect time to use them.

And a new survey suggests that more Americans plan to do just that -- cashing in their credit card rewards as a money-savvy way to enjoy everything from quick weekend getaways to extended overseas vacations -- during these summer months.

According to the latest quarterly Capital One Rewards Barometer, which surveys how consumers accumulate and redeem credit card rewards, about 40% of consumers plan to use their credit card rewards for travel this summer, up from about one-third of consumers who used credit card rewards for summer travel last year.

Among those using credit card rewards to reduce the cost of summer travel, the survey found that the most popular ways to redeem rewards are:

  • Paying for hotels (55%)

  • Purchasing air travel (48%)

  • Buying gasoline (42%)

The fact that so many people will be using their credit card rewards to pay for gas isn't surprising since rising fuel prices mean a lot of people taking road trips are looking for ways to relieve some of their pain at the pump.

AAA predicts that 39 million Americans will travel 50 miles or more from home during the Independence Day holiday weekend, down slightly from the 40 million people who traveled a year ago during the 4th of July holiday.

And since gas prices are hovering close to $3.70 a gallon nationwide -- about a dollar more than last year -- it's no wonder that 48% of those surveyed by Capital One said that gas costs would influence their summer travel plans.

Interestingly, even though more people plan to redeem rewards, relatively few consumers are actually happy with their credit card rewards programs. During the past three months, 43% of those polled by Capital One redeemed rewards, but only 24% of consumers said they were completely satisfied with their current credit card rewards program.

The biggest downers for consumers who wanted to redeem travel rewards but couldn't? Blackout dates and an inability to book last-minute trips.

Strategies of a Credit Card Rewards Guru

Blackout dates and other obstacles haven't stopped Pete D'Arruda from squeezing all the benefits he can out of his credit card rewards programs.

D'Arruda, who was recently profiled by MarketWatch, revealed that he has 25 credit cards with a combined credit limit of $300,000. That includes a fistful of Visas and MasterCards, along with gas, airline and individual store cards.

Why so many cards? It started out as an experiment to see how many cards he could acquire – as well as how his credit rating might be impacted by having so many cards. Contrary to what you might expect, D'Arruda says it's been great for his credit -- his FICO credit scores are in the 810 to 815 point range. (Read this list of five surprising things that can hurt your credit scores).

But now D'Arruda, who pays off his credit card balances each month, uses all that plastic as a way to score freebies. He says he only gets credit cards that offer juicy miles, points, cash-back rewards and other perks.

His favorite? He told a MarketWatch reporter he's a big fan of his Capital One card because it offers double miles as part of their credit card rewards program.

In addition, D'Arruda holds the Disney Visa card from Chase; he's racked up enough points on it to pay for a Disney cruise this Thanksgiving. And the platinum American Express card in his wallet has sufficient points to buy airline tickets from his home in North Carolina to Orlando, Fla.

D'Arruda amassed hundreds of thousands of points and miles by charging everything – and I mean everything – including his cups of java as well as the rent for his office space.

"I'm getting paid to have a good credit score," D'Arruda said in discussing the benefits he reaps from his credit card rewards as a result of charging and paying his bills on time.

It should be noted that since D'Arruda also carries the Visa Black Card and is a founder of Capital Financial Advisory Group in Cary, N.C., he's presumably doing pretty well for himself financially. After all, with some credit card rewards programs, it pays to be rich.

So even though I like his strategy of tapping his credit card rewards for all they are worth – who doesn't want to be rewarded for their spending and for customer loyalty? – I'd caution those who aren't as financially disciplined.

Having an excessive amount of available credit, especially with the enticement of earning attractive rewards, is pure temptation to a lot of people.

Bottom line: Spend and charge responsibly. If you can leverage your credit cards rewards programs and get valuable freebies from them, that's great, and I say go for it.

But if you know you'd be likely to over-spend with a wallet full of extra credit cards -- even if they're the best travel credit card rewards available -- I'd suggest keeping your plastic passion in check.