People Who Get the Biggest Credit Card Rewards Have This One Thing in Common

Want to know the secret for how to get the most out of rewards credit cards? It’s not your income. It’s not how much you spend. It’s how much value you get from your cards, while reducing how much you pay for your cards.

According to a recent study from the Federal Reserve, one special group of people tends to get the biggest benefits from rewards credit cards. Want to see how you can join them?

Let’s look at what it takes to get the biggest credit card rewards while avoiding the risks and costs.

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What are the benefits of rewards credit cards?

Why do people use rewards credit cards in the first place? Is it really worth all the effort and hassle to use different cards at different stores, and pay multiple credit card bills each month?

The truth is: not everyone wants to use rewards credit cards. It might seem like too much work to juggle all the details, for not enough benefits. But if you’re savvy about credit cards, if you enjoy the process of paying your bills each month and managing your budget, you can get a lot out of credit cards that’s worth more than the time you put in.

To get the best deal from rewards credit cards, you should try to:

  • Pay your credit card bills on time and in full: Don’t carry a balance, don’t get charged interest. These cards should help make you money, not take your money.
  • Manage your credit responsibly: Opening too many cards too soon, or running up a balance and hurting your credit utilization ratio, can cause your credit score to take a hit.
  • Be strategic about the cards you use: Do you want to save money on travel, airline tickets or hotel stays, or get cash back on everyday spending? There’s no one right way to use rewards credit cards, but having a plan can keep you motivated and focused to get the best results.

Your goal in using credit card rewards should be to earn more benefits (cash back, free travel, and so on) than you spend on fees and interest. Even if you use a rewards card with an annual fee, this can still be worth it if you get hundreds of dollars of extra value out of the card.

Now let’s see who gets the biggest benefits from rewards credit cards, according to Federal Reserve economists.

How to get the best deal from credit cards: Have a high credit score

A 2023 study from the Federal Reserve, called “Who Pays for Your Rewards? Redistribution in the Credit Card Market,” found that people with high credit scores — not just higher incomes — tend to get the best deals from rewards credit cards.

The Fed study looked at a few different levels of income and credit scores among rewards credit card customers. People with “higher incomes” defined as $79,000 per year or higher, and “super-prime” credit scores (FICO® Scores above 780) tend to get the biggest benefits from rewards credit cards. This group got the largest amount of “net rewards” (how much dollar-value benefit they get from the cards after subtracting how much they pay in interest and fees).

Does this mean that rewards credit cards are only a good deal for wealthy, high-income people? Not exactly. The Fed study found that lower-income customers with high FICO® Scores can also get a good deal from rewards credit cards, although their gains are not as big as higher-income people.

The biggest “losers” of the rewards credit card game, according to the Fed study, are actually people with higher incomes ($79,000 and up) but “sub-prime” credit scores (defined in the study as FICO® Scores below 660). These people make good money but struggle to manage their credit. As a result, they tend to spend more on their cards, but then rack up more fees and interest charges when they fail to pay off their balances in a timely, cost-effective way.

Bottom line

You don’t need to have a high income for a good experience with rewards credit cards, but it does help to have a higher credit score. The Fed study used the word “sophisticated” to describe customers who get the biggest benefits from rewards cards. If you are financially sophisticated, you’re more likely to understand how credit cards work, and be attentive to how you manage your monthly bills.

Even if you’re earning a low income or need to increase your credit score, you can learn more about banking and credit cards to increase your financial sophistication. Knowing how to manage your personal finances can help you get a better deal from credit card rewards — and get the most out of your money in everyday life.

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