Want to Maximize Your Credit Card Rewards? Follow These 4 Tips

Whenever I go out to dinner, buy a plane ticket, or pay for things at stores, I always use credit cards. I'm somewhat of a finance nerd (which is why I do what I do for a living) and love the idea that I can make money by paying for everyday goods and services.

In fact, when you use credit cards the right way, you can make money in two ways. First, by using cards that offer cash back rewards or miles, I can literally get free money for things I would buy anyway. Second, because I have a certain amount of time to pay the bill, I can leave my money in the bank earning interest.

I'm getting ahead of myself here. The credit card rewards game is only worth playing if you're going to do it right. These four rules can be your playbook for credit card rewards success.

1. Never pay interest

Warren Buffett has famously said in regard to investing: "Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1."

I'd say a similar rule applies to credit cards. Rule No. 1 is to never pay interest.

One of the best features of using credit cards to pay for things is that interest doesn't start right away. You typically have a certain amount of time to pay the bill before interest starts to accumulate. This is usually anywhere from 21 to 55 days, depending on your card's particular rules. If you pay your bill in full before the grace period runs out, you won't have to pay any interest.

It's also worth noting that the grace period is generally for purchases only. It doesn't apply to cash advances or balance transfers.

2. No unnecessary purchases

Did you ever wonder why some credit cards offer massive welcome bonuses when you hit a certain spending threshold? Or why do they offer lucrative cash back rewards rates in the first place? It's to entice you to spend more than you otherwise would.

So, the next rule of winning the credit card rewards game is to only use credit cards to buy things you would purchase anyway. Some things are more obvious -- for example, when I'm at Starbucks I'm going to order the same drink whether I'm paying cash or credit. On the other hand, there are some things you might be more willing to buy if paying with plastic. Before you make any impulse buys, ask yourself if you'd be willing to pay with cash (or a debit card) if you discovered that you left all your credit cards at home. If the answer is no, move on.

3. Have a few credit cards

I have more credit cards than the average person needs. Analyzing and reviewing credit cards is part of my job, after all. But to play the rewards game, it can help to have more than one credit card in your wallet.

For example, you might want to keep a great flat-rate cash back credit card for everyday purchases, a credit card like the Discover it® Cash Back card that offers higher rewards (up to a quarterly spending limit) on rotating categories that you must activate quarterly, and cards that offer high rewards rates at merchants where you shop. For example, there's a Costco Anywhere Visa® Card by Citi in my wallet, as my wife and I shop at Costco often. Why earn 1%-2% back on spending when you could get 4%-5%?

4. Maximize your yield in the meantime

Earning credit card rewards for your purchases is only one side of the story, especially with the rising-rate environment we've been in for the past year and a half or so.

If you only buy things you actually have the money for, and you take advantage of your credit card's grace period, as mentioned earlier, you can leave your money in the bank to earn interest until your bill is due. With some of today's high-yield savings accounts, doing this month after month can result in a significant amount of additional money over time.

For example, imagine you charge $1,000 worth of monthly bills on your credit card, thereby leaving that $1,000 in the bank to earn interest until your credit card bill comes due. Now imagine your savings account pays a current APY of 5.00% (not at all unheard of today). You would earn $50 in interest on that $1,000 by leaving that money put for just one month.

The bottom line

Credit card rewards can be a great way to get paid for your purchases, but only if you play the game the right way. By keeping these four rules in mind, you'll put yourself in a position to maximize your rewards and keep yourself from spending too much in the process.