How To Actually Use Those Credit Card Points

Not all credit cards are created equal, and if you've done your research before signing up for one, you've hopefully secured a card that offers useful rewards for you. Ideally, you should also be using those rewards. According to a recent Bankrate report, nearly a third of rewards credit card holders never redeem their points.

"Past surveys have shown that a lot of people are prone to hanging on to the same card for years and years," says Robin Saks Frankel, a credit card analyst at Bankrate. "What this says to us is one of two things: They either aren't aware of the rewards that come with that card — it's just this piece of plastic in their wallet that they use when it's convenient, and they just get their bill and pay. Or the rewards they're getting with those cards are not particularly of value to them."

You don't want to fall into either camp. If you're signing up for a card for the first time or are looking into a new one, Frankel says to consider where you would be most likely to actually spend rewards — and be realistic. There's no one-size-fits-all card, but there is a difference between how you imagine you'd like to spend your money and how you actually spend your money. If you travel a lot, for work or for fun, you may want to sign up for a travel rewards card. But if it's not so easy for you to slip away, don't get a credit card with great travel perks just because it's fun to fantasize. Instead, consider a rewards card that emphasizes categories like gasoline and groceries.

"It wouldn't make sense for someone who is on their first job out of college and has a lot of student loans or other debt to get one of those premium travel credit cards like the Chase Sapphire Reserve, which has a $450 annual fee," Frankel says. "You may not earn enough back in rewards to justify that fee. I would also watch out for rewards that have no meaning for you. You don't want rewards that come in the form of a discount on something too specific and small, maybe on a home security system or a flower service. You want rewards that are in broader categories, so you're more likely to use them."

She name-checks the American Express Blue Cash card (which has no fee) and the Blue Cash Preferred card (which has a "relatively low" $95 annual fee) as examples.

"The main difference between the two is the way they pay back the rewards. The no-fee Blue Cash card pays 3% back on your purchases at the supermarket. So for every $100, you get a $3 rebate, 2% back at gas stations and select department stores, and 1% back [on all other purchases]," Frankel explains. "The Blue Cash Preferred pays 6% back at the supermarket, 3% back at gas stations and select department stores, and 1% back [on all other purchases]. So for that $95 fee, if you spend really heavily at the super market and gas stations, you could balance out by how much you're earning back over the course of a year."

In general, she says, you can't go wrong with a no-fee cash-back card. She also likes the Discover it card, the Chase Freedom, or the Chase Freedom Unlimited, which are no-fee cash-back cards and are also simple to use.

As far as actually using your rewards, the rules are pretty similar to basic budgeting guidelines: Be alert, and keep track of your spending.

"Check online," Frankel suggests. "A lot of credit cards will tell you what your rewards balance is on your paper statement, which is how most people tend to pay their credit cards bills, but you have to hunt for it a little bit. It should be pretty easy to find and manipulate if you log in to your credit card account online, and that's how most credit cards tell you to redeem the points."

You should also look for the date when any points expire. Some rewards credit cards offer points that never expire — "a good option if you're not sure yet how you're going to use your points," Frankel notes — but she says the easiest thing to do in any scenario is to take a cash-back redemption, which typically comes in the form of a credit back on your statement, or an actual deposit into your checking account. Either option is fine, as long as the company makes it as simple for you to redeem as possible. The less you have to think to redeem your rewards, the better.