Common Mistakes to Avoid While Using Credit Card Rewards

8 July 2025

Using credit card rewards can feel like scoring free money. Who wouldn’t want cash back, airline miles, or hotel stays just for spending as usual? But hold on… it’s not always sunshine and rainbows. Rewards can be a great perk—but only if you play your cards right (pun intended). A lot of people dive into the credit card rewards game without understanding the traps, and those mistakes can cost you big time.

Let’s break this down and talk about the most common credit card rewards mistakes. If you’ve made any of these before, don’t worry—you’re not alone. But if you’re about to apply for a new rewards card, or already have a wallet full of them, this might just save you some serious regret.

1. Chasing Rewards While Ignoring Debt

Let’s get real for a second. If you carry a balance month to month, those rewards are getting crushed under a pile of interest charges. Most rewards cards come with high APRs. So even if you're earning 2% cash back, paying 20% in interest completely wipes out the benefit—and then some.

Why it’s a mistake: You end up paying more in interest than you’re earning in rewards. It’s like filling a bucket with holes.

What to do instead: Always pay your balance in full every month. If you can’t, prioritize paying off debt before chasing points or perks.

2. Overspending Just to Earn Points

This one’s a sneaky little trap. You tell yourself, “If I just spend a few hundred more, I’ll hit that bonus!” Suddenly, you’ve got a new TV you don’t need and an empty savings account.

Why it’s a mistake: You're not actually saving money—you’re spending more than you intended. And that’s not a win.

What to do instead: Stick to your regular budget. Only use your credit card for purchases you were going to make anyway. Let the rewards come to you organically.

3. Letting Points Expire

Yep, rewards points don't last forever. Many people accumulate points and forget about them. Next thing you know, you log in and they’re gone—poof, just like a Snapchat message.

Why it’s a mistake: You worked hard to earn those points, and now they’re useless because you didn’t cash them in.

What to do instead: Check the expiration policy for your rewards program and set reminders to use your points or miles regularly.

4. Not Understanding Redemption Rules

Every credit card company and rewards program has different rules. Some offer full value when booked through their travel portal, others slash the value when redeemed for gift cards or merchandise. If you're not clear on how redemptions work, you could be cashing out your rewards for way less than they're worth.

Why it’s a mistake: You could end up using your points for something worth 0.5 cents per point instead of 1.5 cents. That adds up.

What to do instead: Take some time to read the fine print on your rewards program. Find out the best way to redeem points for maximum value.

5. Ignoring Fees and Interest Rates

A flashy sign-up bonus might look amazing, but is it really worth a $550 annual fee or 23% APR?

Why it’s a mistake: You might earn $500 in points but pay $550 for the privilege. That's not a deal—that’s a loss.

What to do instead: Balance the perks against the costs. If you're not using the card enough to benefit from the rewards, go for a no-annual-fee card instead.

6. Opening Too Many Cards at Once

Opening multiple credit cards just to rack up bonuses might sound smart… until it isn't. Your credit score could take a hit, and juggling several cards makes it easier to lose track of payments.

Why it’s a mistake: It can mess with your credit, and you risk missing payments or overspending.

What to do instead: Space out your applications. Focus on one card at a time, and nail that sign-up bonus before moving on to the next.

7. Not Meeting Minimum Spending Requirements

Most sign-up bonuses come with strings attached—you have to spend a certain amount in the first 3 months. Miss that target by even one dollar, and say goodbye to that sweet bonus.

Why it’s a mistake: You might end up with a new credit inquiry and no bonus to show for it.

What to do instead: Make sure you have enough planned expenses to meet the requirement before applying. Think rent, groceries, or insurance—stuff you’d pay for anyway.

8. Using the Wrong Card for the Purchase

Not all rewards are created equal. Some cards give you 5% cash back on groceries, others on gas, travel, or dining. If you're not matching the card to the category, you're leaving money on the table.

Why it’s a mistake: You might only earn 1% back when you could've earned 5%. That’s just poor strategy.

What to do instead: Know your cards’ reward categories. Use the right card for the right purchase. Make a cheat sheet if you have to—it’s totally worth it.

9. Failing to Monitor Rotating Categories

Some cards offer rotating 5% cash-back categories, but they require activation each quarter. Miss activating it? That grocery run just earned you 1% instead of 5%.

Why it’s a mistake: You miss out on higher rewards simply because you weren’t paying attention.

What to do instead: Set calendar reminders to activate your categories each quarter.

10. Ignoring Credit Score Impacts

Every time you apply for a new card, your credit takes a small hit from the inquiry. And if your utilization goes up or you close older accounts, your score can take a bigger tumble.

Why it’s a mistake: You might hurt your score without realizing it. That could affect your ability to get a loan or mortgage down the road.

What to do instead: Apply wisely. Keep your oldest accounts open, and maintain low balances to keep your credit score healthy.

11. Hoarding Points Instead of Using Them

Some folks treat their points like gold—valuable but untouchable. The problem? Points can lose value over time due to devaluations or inflation.

Why it’s a mistake: You're sitting on rewards that might be less valuable tomorrow than they are today.

What to do instead: Use your points when you have a worthwhile redemption opportunity. Don't wait for some mythical “perfect time.”

12. Redeeming for Low-Value Rewards

Merchandise and low-value gift cards might look tempting, but they rarely give you the best bang for your points.

Why it’s a mistake: You could be turning $100 worth of points into just $50 in value.

What to do instead: Use your rewards for travel, statement credits, or cash back—whichever offers the best value per point.

13. Forgetting to Combine Points (If Allowed)

Some programs let you pool points between family members or link loyalty accounts to combine balances. If you’re not doing that, you could be missing out on bigger redemptions.

Why it’s a mistake: You could’ve booked a flight or upgrade if you’d pooled your points.

What to do instead: Look into your program’s rules on sharing or transferring points. It might be easier than you think.

14. Overlooking Bonus Categories and Promotions

Credit card issuers often run temporary promotions—like extra points for shopping at certain stores or booking through their portal. If you're not keeping an eye out, you're leaving free points behind.

Why it’s a mistake: Bonus offers are a free way to rack up rewards faster.

What to do instead: Subscribe to email updates and check your credit card portal regularly for new promotions.

15. Not Tracking Your Rewards

With multiple cards, categories, and expiration dates, it’s easy to lose track. This can lead to missed redemptions, expired points, or using the wrong card at the wrong time.

Why it’s a mistake: Disorganization kills your efficiency and value.

What to do instead: Use an app or spreadsheet to track your cards, rewards balances, bonus categories, and expiration dates.

Final Thoughts

Credit card rewards are a fantastic tool when used right—but using them wrong can feel like stepping on a rake. The key? Stay intentional. Know the rules, don’t chase points blindly, and always prioritize your financial health over free flights or shiny perks.

So if you've been making any of these mistakes, don't beat yourself up—just adjust your strategy. Your wallet (and your future self) will thank you.