Credit utilization is the percentage of your total available credit that you’re currently using. If you have one credit card with a ,000 credit limit and you charge ,000 to that card, then your utilization percentage is 20%. But if you have 10 different cards, each with ,000 credit limits, then that your credit utilization percentage is only 2%.
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The first thing is to make sure that you have the financial ability, discipline and organization to manage all of your credit cards. Missing payments and paying credit card interest and fees will quickly sap up any rewards you might earn.
As an incentive for you to use their cards, many credit card issuers pass some of those funds on to the consumer in the form of credit card rewards.
Before signing up for a new credit card, it’s best to pay off your existing cards first — otherwise the fees and interest will quickly outweigh any rewards you earn.
But it can be challenging to navigate the world of credit card rewards. Hundreds, if not thousands, of different credit cards exist, and the type and amount of rewards vary with each card.

• Bank and credit card points: Chase Ultimate Rewards, American Express Membership Rewards, etc.
• Airline miles and hotel points: Delta SkyMiles, Hilton Honors points, etc.
• Cash back: Straight cash that can be redeemed either as statement credits or checks mailed to you.

How to Maximize Your Credit Card Rewards

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• The sign-up bonus or welcome offer: Many cards offer a large number of miles or points as a welcome bonus for signing up and using the card to make purchases totaling a specific amount within a specified time period.
• Rewards for spending: Most rewards credit cards offer between one and five points for every dollar you spend on the card. Some cards offer the same rewards on every purchase, while others offer a greater reward for buying certain products.
• Perks: Simply having certain credit cards can get you perks like free checked bags on certain airlines, hotel elite status or membership with airline lounge clubs and other retail partners.

You have three different ways to maximize any credit card rewards program:
Another thing to be aware of is the psychology of credit card rewards. It can be easy to justify additional spending because you’re getting rewards or cash back, but remember that buying something that you don’t need in order to get 2% cash back is a waste of 98% of your money.
While it’s true that careful use of credit cards can be a boon, you should watch out for pitfalls.

How Applying for Credit Cards Affects Your Credit Score

Credit card companies and banks make some of their money from the merchant interchange fees that are charged when you use your card.
It’s important to be aware of how applying for new credit cards affects your credit score.
The best credit card is the one that gets you the rewards that help you do what is most important to you.
Since a lower credit utilization is better, having multiple credit cards can actually help this part of your credit score.
There are three main kinds of rewards card offers available:

What to Watch Out for When Using Credit Card Rewards

Usually, the rewards for signing up are much higher than the rewards you get from ongoing spending, so you may want to pursue sign-up bonuses on multiple credit cards as a way of racking up rewards.
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If you have good credit and the ability and discipline to pay off your credit cards in full each month, you should try to maximize your credit card rewards. Otherwise you may be leaving a lot of money on the table.

The Best Credit Cards to Get Started

Dan Miller is a contributor to The Penny Hoarder.
Source: thepennyhoarder.com

• Chase Sapphire Preferred – The Sapphire Preferred card earns valuable Chase Ultimate Rewards and currently offers 60,000 Ultimate Rewards if you spend $4,000 in the first three months. It comes with a $95 annual fee.
• Capital One Venture Rewards – The Capital One Venture Rewards is offering 100,000 Venture miles, which can be used on any airline or at any hotel. It also comes with a $95 annual fee.
• Barclays American AAdvantage Aviator Red – With the AAdvantage Aviator Red card, you’ll get 50,000 American Airlines miles after paying the $99 annual fee and making only one purchase.
• American Express Hilton Honors – If you’re looking for a hotel card, consider the no-fee Hilton Honors card, which comes with a signup bonus of 80,000 Hilton Honors points after spending $1,000 in three months. There is no annual fee.
• Bank of America Premium Rewards – The Bank of America Premium Rewards card comes with a bonus of 50,000 Preferred Rewards points (worth $500) after spending $3,000 in the first three months. The card has a $95 annual fee.

The Bottom Line

If you’re looking for ways to put some extra cash in your pocket, make sure to take advantage of credit card rewards programs.
Other than getting the welcome bonus offers for signing up for new credit cards, another great way to maximize your rewards is by paying attention to bonus categories on your cards. Some cards offer a flat 1 or 2 points for every dollar you spend.
New credit — how recently you’ve applied for new credit cards — accounts for about 10% of your credit score. When you apply for a new credit card, your credit score usually will dip 3-5 points. However, if you’re conscientious with your credit card usage, your score will come back up in a few months. <!–

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If you’re looking to maximize travel credit, then pick an upcoming trip and figure out what airline miles and hotel chain points you’ll need. Then pick the credit cards that give those miles and points. If you want to maximize your cash back, look for a card with a good signup bonus that either offers cash back or bank points that can be converted into cash.