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Don't make this mistake with your rewards credit card

CNBC Select offers advice on using your rewards credit card during the pandemic and four ways to get the most value out of it.

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

There's a reason why rewards credit cards are some of the most popular among consumers.

Users of rewards credit cards can earn cash back, points and miles for every dollar they spend in a wide variety of categories, including groceries, gas and entertainment.

But there is a credit card mistake you could be making that is essentially leaving money on the table: not taking advantage of the rewards your card offers.

In fact, a Bankrate survey from earlier this year showed that more than half (55%) of rewards credit cardholders who pay their bills in full each month are missing out on rewards because they are opting to use cash or debit instead.

Below, CNBC Select offers advice on using your rewards credit card during the pandemic and four ways to get the most value out of it.

How to use your rewards card during the pandemic

It's important to review any changes to your rewards credit cards, especially right now when you may not being using your cards the same way you did before the pandemic. 

Before switching to using cash or a debit card, review how your credit card is rewarding your new spending habits. 

You may be surprised to learn that many card issuers have altered their rewards programs to reflect the way people are living during the pandemic and are offering limited-time bonus rewards in added categories. This is especially important to know about if you have a travel rewards card with a high annual fee

For example, restaurant, takeout and food delivery purchases earn rewards with the Marriott Bonvoy Brilliant™ American Express® Card and the Hilton Honors American Express Aspire Card. With the Marriott Bonvoy Brilliant, cardholders can pay for eligible purchases at U.S. restaurants using their annual Marriott Bonvoy (up to $300) statement credit benefit. This statement credit can only be used on eligible purchases at hotels participating in the Marriott Bonvoy ™ program. When it comes to the Hilton Honors Aspire Card, eligible purchases at U.S. restaurants now qualify toward the annual $250 Hilton resort credit benefit.

Citi has also made temporary changes to the Citi Prestige® Card's annual $250 travel credit. Previously, this credit only applied to travel purchases, such as airfare and hotels, but now cardholders can receive a credit up to $250 for eligible purchases at supermarkets and restaurants through December 31, 2020. The Citi Prestige Card has a $495 annual fee.

Capital One has also adapted to cardholders' new spending habits. Capital One Venture Rewards Credit Card and Capital One VentureOne Rewards Credit Card cardholders can now redeem their miles for eligible restaurant delivery, takeout and streaming service purchases. And Capital One Savor Cash Rewards Credit Card and Capital One SavorOne Cash Rewards Credit Card customers now get increased cash-back rates on eligible streaming services. Previously, streaming purchases earned 1% cash back, but you can now earn 4% (Savor) and 3% (SavorOne) cash back on eligible streaming services (such as Netflix, Hulu and Disney+). Both new benefits are eligible through September 2020.

4 ways to get the most value using a rewards card

To really get the most bang for your buck when it comes to rewards cards, there's some general guidance you can follow.

  1. Pay your balances in full: Because interest rates on rewards credit cards can be notoriously high, it's important that cardholders pay their balance off in full by the end of each billing cycle. Not only will interest accrue if you don't, but the added cost will start to negate any of the rewards you earned. According to CNBC Select calculations, the average American could earn $966 in rewards after the first year with the Capital One Venture Rewards Credit Card, but the variable APR is a steep 17.24% to 24.49% on purchases and balance transfers if you carry a balance month to month.
  2. Consider 0% APR offers: Before you jump on applying for a rewards credit card with a high interest rate, think first about what purchases you'll be charging. If it's an expense you don't want to pay off immediately, look at cards that offer a zero interest promotional period. Some of the best 0% APR credit cards come with great rewards. For example. the Amex EveryDay® Credit Card has an introductory 0% APR for the first 15 months on purchases (after, 12.99% to 23.99% variable APR, see rates and fees), and offers 2X Membership Rewards® points at U.S. supermarkets on up to $6,000 per year in purchases (then 1X) and 1X Membership Rewards® points per dollar spent on all other purchases. Use your Membership Rewards® points as statement credits toward eligible charges you make on your card, such as retail, dining, entertainment and more.
  3. Evaluate where you spend the most: If you don't travel often, it doesn't make sense to apply for something like the American Express® Gold Card or Chase Sapphire Reserve® (especially given their hefty annual fees). Get the most out of your rewards card by using one that is tailored to your spending habits. If you're constantly streaming while stuck at home during the pandemic, the Blue Cash Preferred® Card from American Express offers 6% cash back on up to 28 select U.S. streaming subscriptions, including popular services like Netflix, Spotify, Audible and YouTube. (Cash back comes in the form of Reward Dollars that can be redeemed as a statement credit.) If you stock up on your essentials from Walmart, consider the Capital One Walmart Rewards® Card, where you can earn 5% on grocery pick-up and delivery, as well as 5% on purchases from Walmart.com.
  4. Be smart about how you cash in rewards: To really take advantage of your credit card, make sure you think twice about how you redeem the rewards you earn. Your rewards are generally worth about 1 cent per point/mile, so you'll want to make sure you are getting at least a 1:1 value when you cash in. With certain incentive offers, however, the redemption rate can be even higher. For example, the Chase Ultimate Rewards® (CUR) portal is a great resource for cardholders looking to maximize their points. With Chase's new Pay Yourself Back feature, users of the Chase Sapphire Preferred® Card and Sapphire Reserve receive 25% to 50% more value on their Ultimate Rewards points that are redeemed for statement credits on eligible purchases at grocery stores, dining and home improvement stores through September 2020. This is an increased value of 1.25 cents each (for Preferred) or 1.50 cents each (for Reserve).

Bottom line

To avoid missing out on your credit card rewards, stay up to date with what your card issuer is offering and keep track of the different spending categories. This is especially important if you have multiple credit cards.

And considering many of the best rewards cards, like travel cards, come with an annual fee, it's worth calculating whether the rewards offered (old and new) still justify the cost.

Don't miss: NY Senate passes bill that provides 90-day grace period to redeem credit card rewards

Information about the Hilton Honors Aspire Card, Capital One cards, Citi Prestige®, and Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication. 

For rates and fees for the Amex EveryDay® Credit Card, click here

For rates and fees of the Marriott Bonvoy Brilliant™ American Express® Card, click here.

For rates and fees of the Hilton Honors Aspire Card from American Express, click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.