Using a rewards credit card is a savvy way to maximize the value of your purchases. However, not all transactions will earn you cash back, rewards points, or miles. Let’s dive into the types of purchases that won’t net you any rewards.

1. Cash Advances

Taking a cash advance means borrowing against your credit limit and withdrawing money at an ATM or using a convenience check from your issuer. You’ll face a cash advance fee and a higher interest rate. Importantly, cash advances have no grace period, meaning interest accrues immediately. These transactions are costly and do not earn rewards, including cash equivalents like wire transfers and peer-to-peer transfers.

2. Balance Transfers

Although balance transfers can save you money on interest through 0% promotional offers, these transactions do not earn rewards. Be mindful of the balance transfer fee, which is usually 3% to 5% of the transferred amount, to ensure you save on interest in the long run.

3. Fees

Transaction fees, such as those for cash advances or balance transfers, and penalty fees for late payments, do not earn rewards. These fees can diminish the value of any rewards you do earn. Always weigh the potential rewards against any recurring fees like annual fees.

4. Interest Charges

Interest charges on carried balances do not earn rewards. To maximize your rewards, aim to pay your balance in full each month. Otherwise, the cost of interest might offset the value of your rewards.

5. Insurance Premiums

Many families face significant expenses in insurance premiums. Unfortunately, these payments often do not qualify for rewards. Before using your credit card for your next premium, check the exclusions list to see if the purchase will earn rewards.

6. Taxes and Government Fees

Using a credit card for taxes or fees paid to the government often incurs a convenience fee. Additionally, these transactions typically do not earn rewards, making them an expensive option. Opting for a payment method that doesn’t charge fees is usually more advantageous.

7. Gift Cards and Prepaid Cards

While gift cards and prepaid cards are convenient gifts or budgeting tools, they may not earn rewards. Some issuers categorize these as cash equivalent transactions, which are ineligible for rewards.

8. Purchases Above the Earning Cap

Some credit cards offer increased rewards on certain purchases but only up to a specified amount. For instance, you might earn 5% back on travel up to $5,000 annually. After reaching this cap, further purchases may not earn rewards or might only earn at the base rate, often 1%. Check your rewards program terms to understand the post-cap earning rate.

9. Purchases Outside the Bonus Categories

While purchases in bonus categories earn rewards at a higher rate, those outside these categories might not earn rewards at all or may only earn at the base rate. Be cautious of how merchants process transactions, as third-party processing can sometimes lead to missing out on bonus rewards.

10. Purchases Made With Points

Redeeming points for purchases can be tempting, but these transactions often do not earn additional rewards. Decide whether using rewards or saving them for a future redemption while paying with your credit card makes more sense.

11. Returned Purchases

If you return a purchase, you might see a deduction in your rewards balance, especially if you’ve already redeemed the rewards earned from that purchase. To avoid a negative balance, consider opting for a store credit or gift card instead of a refund to your credit card.

While cash advances, balance transfers, fees, and interest generally do not earn rewards, other exclusions vary by issuer. Review your credit card’s reward guide to identify non-qualifying transactions or those that don’t earn at the bonus rate.

If you’re in the market for a new rewards card, remember that the best options typically require good to excellent credit. Check your credit score before shopping to narrow down suitable cards or take steps to improve your credit for better options in the future.

If you ever need expert assistance or guidance on your credit journey, don’t hesitate to reach out to the Nerds! Additionally, stay updated with the latest tips and information by following us on Facebook, Instagram and TikTok!