How to Tell If You Need a New Rewards Card Strategy

If you are an investor, you know that you should re-evaluate your portfolio from time to time in order to maximize your returns. And if you use credit cards to earn rewards, you should regularly reconsider your credit card strategy as well. (See also: Best Travel Rewards Credit Cards)

The credit card industry is intensely competitive, and card issuers are constantly releasing new and improved reward cards. The latest cards may offer you more rewards for your spending, or feature valuable cardholder benefits that you don’t currently enjoy. And while there’s never a bad time to get a great new credit card, here are five signs that you really need a new rewards card strategy.

You have a lot of unused rewards

I meet people all the time who tell me they have hundreds of thousands of points and miles that they never use. Perhaps the rewards program is too complicated, or maybe the awards offered just aren’t attractive. Either way, there’s no sense in continuing to collect rewards that aren’t offering you continued value. (See also: Which Credit Cards Have the Best Travel Redemption Value?)

Perhaps you’ve been using a co-branded airline credit card for an airline with limited awards seats going to destinations you aren’t interested in. In that case, look for a travel rewards credit card with flexible redemption options so you aren’t stuck with miles for an airline that you can’t use. (See also: Best Credit Cards with Easy Travel Redemption)

You’ve just gotten married or started a family

When your household changes, it might be time to change your credit card rewards strategy. For example, the card that once offered you extra points for dining out and entertainment purchases may suddenly be less valuable now that you’re spending more time at home with a new baby. At the same time, a credit card that offers you additional rewards at warehouse stores might not help singles much, but it could be a great idea as your family grows. (See also: Best Credit Cards for New Parents)

Your budget is being eaten alive by annual fees

Many of the most valuable reward credit cards have annual fees, and they can often be worth it in order to receive more generous rewards and benefits. But at some point, you may realize that you’re not using the benefits enough to justify the fees.

Making this calculation is a little more complex than you might initially think. You shouldn’t pay an annual fee just because you think you will earn rewards that are worth more than the fee. Instead, you have to compare at the value of the rewards you are earning with those that you could have earned from a similar card that has no annual fee. It’s the difference in value between the no fee card and the fee card that must justify paying the fee. (See also: Simple Guide to Evaluating a Credit Card With an Annual Fee)

For example, you might be able to earn double miles on all purchases with a card that has a $95 annual fee. But just because you earn more than $95 in rewards, it doesn’t mean that it was worth it. Instead, the same bank might have a card that offers 1.25 miles per dollar, with no annual fee. To justify the annual fee, you have to come out $95 ahead of where you would have been with the card with no annual fee. (See also: Best Credit Cards With Annual Fees)

Your travel habits change

Credit cards that offer travel rewards are alluring, but they may be of little use if you don’t get value from their rewards and benefits. For example, a free checked bag is often a benefit of an airline credit card, but it doesn’t help if you just take business trips with a carry-on, or your checked bag is reimbursed by your company. Likewise, you might have once preferred to earn cash back rewards when you didn’t leave home often, but frequent flyer miles could have become more valuable to you since you caught the travel bug. (See also: Best Travel Rewards Cards for Families)

You’re spending too much time managing your rewards

There are some reward cards that offer simple cash back, but then there are the complicated points and miles programs that seem to be designed to be so confusing that you give up. If you find yourself frustrated by the time and energy it takes you to manage your credit card rewards, then it’s clearly time for you to seek a new strategy. (See also: The 7 Biggest Mistakes You Can Make When Redeeming Credit Card Rewards)

One option: a flat-rate cash back credit card that gives you 1.5–2% back on every purchase you make. These cards come with no bonus categories you have to keep up with, so they’re easy to understand and use.

Tips for creating a new credit card rewards strategy

Now that you’ve determined you need a new plan, here are a couple of next steps to get you started.

Determine how much your points and miles have been worth to you

Look back on how you’ve been able to redeem your points and miles, and what the value of your awards have been. Divide the value of an award by the number of points or miles used to come up with a typical value per point or mile. Use this as a starting point to find better rewards in the form of points, miles, or cash back. (See also: Which Airline Loyalty Program Has the Best Value for Their Miles?)

Look for rewards that match your lifestyle

If your goal is to visit Paris, you wouldn’t want to earn miles on an airline that doesn’t fly to Europe. And if you are a budget traveler, you’ll want to avoid hotel points that can only be used at luxury resorts. Set goals for your credit card rewards, and then find the card that will allow you to reach those goals. (See also: Cash Back vs. Travel Rewards: Pick the Right Credit Card for You)

Don’t plan more than a year out

If you are earning points or miles, you want to reach your goal within a year. This is because points and miles will inevitably decline in value as the airlines and hotels charge more for a given award. This process is known as devaluation, and nearly every airline and hotel will devalue their programs about once every year or two. Of course, they inevitably spin these devaluations as “enhancements.” (See also: Ask These 7 Questions to Help Choose the Perfect Credit Card)

Don’t forget to value the benefits, especially fee credits

When Chase released its Sapphire Reserve card in 2016, it was a smash hit that took the industry by storm. Even though it had a pricey $450 annual fee, savvy cardholders quickly realized the $300 annual air travel credit, TSA Precheck or Global Entry fee credit, airport lounge access, and other benefits quickly pay for the annual fee. So when considering the true cost of a card’s annual fee, be sure to factor in the value of all of the cardholder benefits, including fee waivers and credits. (See also: The 5 Best Premium Credit Cards)