Make the most of your rewards cards

If you pay your credit cards in full every month, rewards programs can give you some nice perks: free travel, free stuff, cash back.

But the programs are getting stingier as banks try to battle the recession and the credit crunch.

“The banks are strapped for cash. As a result, consumers will have to spend a lot more than they did last year to earn similar rewards,” says Jody Farmer, vice president of strategic marketing for CreditCards.com, whose Web site helps consumers compare credit-card offers from across the country.

CreditCards.com suggests six ways to tap your card’s highest rewards earning potential:

Redeem now: If you’ve earned a lot of points, redeem them sooner rather than later. (The redemption value of points is largely hidden and at the discretion of the card issuer, so the true devaluation of rewards occurs at this stage.)

Switch cards: If you’ve recently redeemed your rewards from a longstanding card, consider shopping around for a new card with a better program. Consider programs that offer extra rewards for the type of spending you do the most — such as grocery shopping, gas and drug-store purchases. Choose a reward that you will actually use and will provide a meaningful incentive.  For example, if finding the time and money to go on a far away vacation isn’t in the cards, airline miles may not be an optimal reward choice.

Go for cash-back rewards: Cash-back rewards are straight-forward in how they are earned and what they are worth. They typically don’t have redemption restrictions such as expiration dates or black-out dates. American Express Blue Cash was the favorite cash-back card among the credit card experts I recently interviewed.

Look for hidden fees: Read the fine print. You might be earning a lot of points or miles but if you’re carrying a balance, you’re probably also paying a higher interest rate or a stiff annual fee — and that negates the freebie rewards concept. Also, understand that your rewards are subject to term changes — with very little or no notice. So keep track of your expiration dates on points or miles so you understand when the system changes.

Double down: To earn more rewards, you might want to add your spouse as an authorized user on your account so you can leverage all of your household card spending and increase your annual reward-earning power.

Loyalty counts: Until it’s time to switch, be true to one credit card to maximize your rewards-earning potential. Choose a card with a low or non-existent annual fee. Then confine your spending to that one card to reap the best rewards.

For the latest credit-card news, check out my columns:

• 20 credit cards that pay you back
• 18 ways to foil credit card thieves
• Credit cards with the happiest users