Avoid these 3 mistakes to maximize your rewards credit card

If you’re in the market for a premium travel credit card, get ready to pay an even heftier annual fee.

On Thursday, American Express rolled out the latest version of its Platinum card, which now comes with a $895 fee, up from $695. Earlier this summer, JPMorgan Chase upped the annual charge for its Sapphire Reserve card to $795.

If that’s not money you’re willing to part with, or if you know you won’t be able to take full advantage of an expensive card’s perks, you may be more comfortable with a lower-rung rewards card with a more modest fee.

But you shouldn’t shy away from cards with fees altogether, says Brian Kelly, founder of The Points Guy. “Don’t go ‘no annual fee,'” he says. “I’m a big believer in cheaper is not better when it comes to credit cards.”

Here’s what he says are the biggest mistakes when it comes to maximizing rewards credit cards.

Going the no-fee route

Kelly doesn’t think you should pay a fee just for the sake of paying one. But even those who take a casual approach to earning and redeeming benefits will likely find that a low annual fee is worth it, he says.

“No-annual-fee cards generally just don’t have great rewards,” he says. “For anyone who spends any amount of money, $95 a year for [a card] which is 2x on dining and travel, plus all the extra perks, is worth it.”

To select a card that works for you, experts say to think about how you already spend, and gravitate toward cards that offer more points for your most popular categories, which may include travel, dining out, groceries or gas.

Even if you already have a card that you think works for you, it’s important to check in to see how your spending and reward preferences may have changed, Kelly says.

“People in general don’t change their cards as their lifestyle changes,” he says. “When people have kids, when people don’t travel much or travel more, or they’re retiring — they don’t switch their credit cards to suit their lifestyle.”

Hoarding points

If you already own a rewards card and you have a huge glut of points sitting around, it might mean that you need to switch to a different card. Or if you’re using a premium card, one with a lower fee.

“If you’re having a tough time using those points over the years and you have a huge balance and you haven’t redeemed recently, I think that’s a red flag,” Kelly says. “You should be able to say, this currency works for the way I redeem points.”

If you’re saving the points on purpose, say, until you hit a particular number or have enough to cover a luxurious trip, you’re likely making a big mistake, too, credit experts say. That’s because rewards programs can change the value of points at will.

“You don’t want to hoard points and miles,” Ted Rossman, senior industry analyst at Bankrate, told CNBC Make It in February. “You don’t want to be a points millionaire. It’s not like a 401(k).”

Failing to negotiate

If you’re uncomfortable with your card’s annual fee, you can always downgrade to a cheaper card — but you shouldn’t do so without asking if your credit card issuer can help you out first, Kelly says.

“If you’re on the fence, the first thing you want to do is, don’t do anything,” he says. “Call the credit card company and say you’re thinking about canceling.”

This may put you through to the retention department, but if it doesn’t that’s who you should ask to speak with, Kelly says. Once you tell them you’re thinking about canceling, they may sweeten the deal to keep your business.

“Often they’ll give you either discounts or points offers that’ll make it a slam dunk, at least for another year,” Kelly says. “And then you can come back the next year to reassess.”

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