Make the most of your holiday spending by optimizing your credit card rewards

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While it might seem like a misappropriation of priorities in this time of economic hardship to concern yourself with rewards credit cards, maximizing your rewards is now actually more important than ever. People need to save anywhere and everywhere they can, including with their rewards, but doing so is unfortunately not as simple as opening just any rewards card and cashing checks or taking free trips.

There are various types of rewards credit cards and each is best suited for different demographics. Knowing how you fit into the equation will ultimately make your rewards more lucrative and lower your overall financial burden. First, it must be noted that rewards credit cards are not for everyone. If you require credit improvement or do not pay your bill in full each month, you should get a card that will help you more efficiently raise your credit standing or lower the cost of your debt. However, if you have excellent credit and pay your bill in full on a monthly basis, then you deserve a reward. What kind though?

When many people think rewards, their minds immediately turn to free flights and hotel stays. While travel is an important segment within the rewards credit card category, it is not the only one. Thus you must carefully consider whether your lifestyle merits getting a travel rewards credit card. Doing so is sensible only if you travel frequently because travel expenses then represent a sizable part of your overall finances, and lowering their cost will provide significant benefit. What exactly is frequent travel though? Well, it surely is not only your annual family vacation. Good benchmarks to use to determine if you’re a frequent traveler are 30,000 air miles or 20 hotel nights per year. If you reach or are near either of these milestones, then you know that you’re a good fit for a travel rewards credit card.

Now you must decide whether you want generic travel rewards or those tied to a particular airline or hotel chain. Generic rewards provide logistical flexibility but both airline credit cards and hotel credit cards allow you to accumulate better rewards at a faster rate. Thus, if you meet the aforementioned travel benchmarks while using primarily the same airline or hotel chain, you should get that particular airline or hotel card. If not, the Capital One® Venture Rewards Credit Card is a great option because it can essentially serve as a 2% cash back card when you redeem for purchases made through any travel agent or on any travel-related website.

At this point, you might be wondering, “Why shouldn’t I get a travel rewards card with only my annual family summer trip in mind?” Credit card companies can change the number of miles or points required for the redemption of rewards at will, thereby devaluing already earned amounts. Thus, frequent redemption leaves less miles or points vulnerable to devaluation at any time. Similarly, if you travel and redeem often you will most likely have experienced many of the benefits of your rewards card at the time of devaluation, lessening the sting of such an occurrence.

If you do not meet the suggested travel requirements, get a cash back credit card. Cash is the most flexible, maintenance-free type of rewards because it cannot be devalued and it can be redeemed as either a statement credit or a check. Two of the most popular cash back credit cards are the Bank of America® Accelerated Cash Rewards American Express® Credit Card — which provides 1.25% cash back on every purchase — and the Chase Freedom® credit card — which provides a $100 bonus when at least $500 is spent during the first three months as well as 5% quarterly bonus categories and 1% cash back on all other purchases.

Ultimately, there is more to the rewards credit card genre than one might think. It is also more important than ever to structure your finances correctly. Therefore, evaluate your lifestyle, determine which type of reward is right for you and use your rewards credit card correctly. Doing so will lower your costs and provide the satisfaction of making your money work for you. Additionally, it might even make your financial outlook seem brighter during this gloomy time.

Odysseas Papadimitriou is the CEO and founder of CardHub.com, an online marketplace for credit card applications and gift card exchange.