Six Reasons Card Rewards go Unredeemed -- and How to Change That

If someone gave you $600, would you throw $200 away?

That's essentially what many consumers do since Americans earn approximately $48 billion in rewards points and miles each year through customer loyalty programs, yet about one-third of that amount -- or $16 billion -- goes unredeemed each year, according to a study by loyalty marketing information company Colloquy and global commerce firm Swift Exchange.

Included in that total are unused credit card rewards, says Jim Sullivan, a partner with Colloquy. When such rewards go unredeemed, "the average household is throwing money out the window," Sullivan says.

So why would you leave free money on the table? Here are some common reasons -- and strategies to put in place to ensure you claim all the rewards you deserve.

Reason No. 1: You don't know what your rewards can buy. Just as consumers should designate time regularly to monitor spending and track financial goals, they should set aside time once a month to check their rewards balances, says Jeanne Brodeur, director of rewards marketing for Discover. Identify things you'd like to use your rewards for, whether it be travel, gift cards or a certain piece of merchandise. Once you determine how much in rewards you'll need, "keep track until you get to where you want to be," Brodeur adds.

Reason No. 2: You don't understand how the rewards process works. To make the most of any rewards program, consumers should do a little research by checking the site of the card issuer's rewards program, says Brodeur. Ideally, this should be done before applying for a particular rewards card. "No two programs are alike so [consumers] need to consider all the terms," Brodeur says. For example, some programs have an expiration on rewards; others don't. Consumers should also consider other differences among card rewards programs. For example, those who frequently shop at Amazon might be happy to know that Discover cardholders can link their cards with and use their rewards to purchase items directly from the retailer. If you're not certain about how the rewards program works, call the company and ask, Brodeur adds.

Reason No. 3: The rewards don't match your lifestyle. Rewards programs that offer discounts at retailers you don't frequent or cash back for services you don't use are likely to go unused. "You don't want to have to do any special planning or go to a specific store if that's not within your normal shopping habits," says Melinda Opperman, vice president of Springboard Nonprofit Consumer Credit Management based in Riverside, Calif. You also don't want to purchase things you wouldn't normally buy just to get a reward, Opperman adds. If your rewards card doesn't offer anything that you can use regularly, trade it in for one that does.

Reason No. 4: The prize you want doesn't line up with your spending. Some people have their eyes on a piece of merchandise or a service that requires a large number of rewards, but they don't spend enough on the card to realistically accumulate enough points or cash back to redeem for it. If this is the case, you can set your sights on something smaller or you can focus all of your spending on one card and one rewards program. "Don't scatter forces among so many programs," suggests Sullivan. "Find the one that offers the best value and try to consolidate your purchasing so you can accrue enough points to make it worth your while."

Reason No. 5: You don't like the rewards being offered. If you have no interest in any of your card's rewards, you can always look for another rewards card, but another solution might be to share the wealth by redeeming your rewards for merchandise to donate to charity. "Charitable organizations have constant needs for goods to support their programming as well as new merchandise that can be used at fundraising events," says Brittany Martin, founder and CEO of Zealous Good, an organization that matches charities with donations.

To determine what a charitable organization needs, do some research on events that it may be planning or better yet give them a call, says Marc A. Pitman, a nonprofit fundraising coach and author of "Ask Without Fear! A Simple Guide to Connecting Donors With What Matters to Them Most." "State what you like about the cause, tell them you want to support it and ask if your gift would help them offset some costs," Pitman says.

Reason No. 6: You're too focused on your debt to care about rewards. No matter how generous a rewards program is, those who have substantial credit card debt could be spending more on finance charges and annual fees than the rewards are worth. If that's the case, your best bet may be to redeem the rewards you have and then put the rewards card away in favor of a card that's more suitable for debt reduction. "If you're carrying a balance from month to month and you're unable to get that paid off, then your No. 1 priority should be looking for a card with the lowest interest rate" and fewer fees, says Opperman.

Those who tend to spend too much might also want to consider a different credit option. Michelle Reid, an attorney in Dallas, doesn't use rewards because she doesn't want to tempt herself into spending on things she doesn't need just for the sake of accumulating rewards. Having successfully pulled herself out of debt in the past, "I'm currently debt free and want to stay that way," she says.

A chance to save money shouldn't be passed up, Opperman says. "The credit card rewards program can be a great tool to save money on purchases that you're already making, as long as you pay the balance off every month."