Are you eyeing a new credit card to rack up points or miles? With an overwhelming number of credit card companies vying for your attention, how do you make the best choice? First, don’t just follow your favorite social media influencer’s recommendation, as their perfect card might not suit your needs. Selecting the right credit card should be a personal decision. To truly get the most out of your credit card rewards, you need to analyze your spending habits and decide which type of rewards align with your goals.

Some credit card sign-up bonuses have the potential to turn into major perks, such as a first class upgrade on an international flight. For instance, consider my own story:

I had just turned 30, gone through a breakup, and planned a solo trip to Colombia (think coffee, not Gamecocks, for those of you who slept through first period geography). This was supposed to be my big escape from daily life, a chance to hit the mental and spiritual reset buttons for two whole weeks. I decided to redeem points to pay for my flight to Medellín, so I looked on the website of my favorite airline to see if they offered a credit card. Turns out, they did, and at that time it had a 50,000-point sign-up bonus. It also came paired with a $595 annual fee but had additional perks like membership to their own lounges, reimbursement of TSA Pre Check fees, rideshare discounts, and the like. I didn’t hesitate to get the card since I’ve always loved travel and thought this would be my ticket to doing so in style.

Thanks to the sign-up bonus, not only was I able to cover the cost of the airfare outright, but I was able to upgrade to first class for the entire trip. Because of the flight’s routing, this meant for 8 hours I’d have my own lie-flat seat in a walled-off pod on the plane, with my own TV and full meal service. That was the first time I wasn’t itching to get off the plane as soon as it landed.

To handle credit cards efficiently and responsibly, doing thorough research is crucial. Each time you open a new credit card, no matter how enticing the offer seems, you could be inching closer to financial trouble if you’re not vigilant. Accumulating debt can significantly impede your other financial objectives. Ideally, strive to pay off your credit card balance in full each month to dodge overspending and steep interest rates. Remember, while the rewards can be appealing, it’s essential to steer clear of these major credit card mistakes. Here’s how you can avoid them.

Rule 1: Don’t overlook potentially unrealistic bonus spending requirements

Many credit card promotions include a spending threshold you must reach to receive a sign-up bonus. For instance, you might need to spend $4,000 in the first three months to earn 75,000 miles. It’s important not to stretch your budget thin trying to hit this target. 

Consider this approach instead: Before applying, honestly evaluate if you can realistically spend that amount within the given timeframe. Seek out a credit card that aligns with your typical monthly spending habits. 

A detail that’s often overlooked in credit card circles: The sign-up period starts from your card’s approval date, not when it arrives in your mailbox. This effectively reduces the time you have to meet the bonus spending criteria. To avoid missing out, jot down the card approval date and calculate the end of the bonus period from there.

Rule 2: Failing to match your lifestyle to your new card

Before heading to what I discovered to be one of the most gorgeous countries on Earth for two weeks, I obsessed over credit cards, especially those offering points or miles. I considered several different offers, paying attention to what each had to offer. Certain credit cards provide rewards like miles, points, or cash back for spending in specific categories such as gas, groceries, or dining. This brings us to a common error: not selecting a card that aligns with your lifestyle and spending patterns, leading to missed opportunities to maximize rewards. 

Here’s what you should do: Be sure you know how much you regularly spend and on what, then opt for a credit card that aligns with your spending habits. For example, if you frequently purchase groceries and gas, find a card that offers 2x or 3x points in those categories. If your expenses are mostly on dining out and traveling, look for a card that provides extra rewards for those activities. Since it’s unrealistic to suggest that you change your spending habits to match a card’s perks and rewards, take the simplest approach and get the card that fits your current spending trends.

Also consider that it you may not maximize your rewards potential by limiting yourself to a single card. Personally, I use one card for all travel expenses to collect miles and another for everyday expenses to earn cashback. But remember, this strategy only benefits you if you pay off your balance in full every month.

Rule 3: Leaving rewards on the table

As I mentioned, the card I chose came with a pretty hefty annual fee, but it also included several perks like monthly rideshare credits, airline fee reimbursements, hotel reservation credits, free streaming TV subscriptions, and 5% in fuel credits. The credit card companies who issue rewards cards offer these types of perks as an effort to offset the card’s annual fee. When choosing a rewards credit card, it’s critical to make sure that you’ll extract at least the value of the card’s annual fee each year to offset its hit on your budget.

Keep this in mind: If the card’s perks are benefits you can actually use to absorb the cost of current expenses, that sounds like a well matched card. In my case, I added up the cost of my annual Uber rides, streaming TV spending, 5% of gasoline purchases, hotel booking costs, and airline baggage/seat fees, and since the total was greater than the $595 annual fee, I didn’t hesitate to apply for the card.

Rule 4: Never take on debt to get credit card rewards

Using your credit card to earn points can seem like a fun way to treat yourself. However, this pursuit comes with a significant risk—potential debt accumulation. With current average credit card interest rates hovering around 24%, consider this: if you accumulate $5,000 in charges for the sake of rewards and can’t pay it off right away, the interest could cost you over $600 within a year, assuming you make no additional charges. 

Instead: Make sure to only charge what you can afford to pay off in full each month. A practical way to do this is by using your credit card in place of your debit card for daily expenses that are already accounted for in your budget.

Rule 5: Purchases with processing fees aren’t really rewarding

Lastly, be cautious when using your credit card for expenses such as rent, utilities, or tuition payments. Unlike retailers who typically cover the credit card processing fees, which usually hover around 3%, landlords, utility providers, and similar service entities often pass these fees along to you. That means you could end up bearing the extra cost. 

What to do instead: Before paying these bills with a credit card, check if there will be an extra fee. Crunch the numbers: if the fee is 3% but you’re only earning 2% cash back, the fee outweighs your reward.

The credit card points game is yours to win

Credit card rewards can be exciting, but careful navigation is essential to avoid costly mistakes. To succeed, devise a solid strategy and follow a clear plan. Know your spending limits, ensure you can pay your balance in full each month, and manage your debt responsibly. Once you have accumulated rewards, take advantage of the perks. Enjoying premium benefits, like first-class lie-flat seats on a long-haul flight, is rewarding and a testament to your skillful credit card management. You’ll rest easier on that flight, knowing you’re winning at the credit card game.