Where Americans Get the Most Out of Their Credit Card Rewards

Credit card rewards come in various forms, from flat cash back to those designed for specific spending, like travel and groceries. Depending on the level of spending and type of reward, these benefits can save households hundreds of dollars a year.

But not everyone takes advantage of credit card rewards programs. So LendingTree researchers set out to find the states with the highest percentage of households using these programs and estimate how much money those who aren’t could be leaving on the table.

Not only does Hawaii lead the way with 75.9% of households using credit card rewards, according to an analysis of 2021 data from S&P Capital IQ Pro, but LendingTree researchers estimate the typical Aloha State household could save the most yearly — $463, on average — by utilizing them.

Key findings

• The most expensive states are more likely to have a higher rate of residents who use credit card rewards. The three states with the highest percentage of households enrolled in credit card reward programs — Hawaii, New Jersey and California — are among the four most expensive states in the U.S., according to Bureau of Economic Analysis (BEA) data.
• Hawaii residents are the most likely to use credit card rewards programs. 75.9% of households in Hawaii use credit card rewards, highest in the nation. LendingTree researchers also estimate that households in Hawaii that don’t use credit card rewards leave the most money on the table — $463 a year, on average.
• Southern states tend to have the lowest share of residents utilizing credit card rewards. All of the top 10 states with the smallest percentage of households enrolled in credit card rewards programs are in the South. Mississippi is at the bottom at 57.4% — nearly 25% lower than Hawaii.
• The percentage of households utilizing credit card rewards has grown in the past five years. Between 2017 and 2021, the rate of households using credit card rewards programs grew from 61.3% to 67.0%.

Hawaii residents heavily utilize credit card rewards, but residents in other high-cost, high-income states aren’t far behind

According to LendingTree’s analysis of 2021 data from S&P Capital IQ Pro, 75.9% of households in Hawaii use a credit card rewards program — the highest in the nation.

But other similarly expensive states — like New Jersey (74.4%) and California (71.6%) — round out the top three. In fact, just one state among the 10 with the highest rates of residents using these programs has an average cost of goods and services below the national average.

Credit card rewards programs can be more valuable to Hawaii residents just by them being in a state where they need to spend more money on goods and services. Specifically, residents here need to fly great distances — and fork out plenty of cash — to leave the Aloha State, meaning travel credit cards may come more in handy there than elsewhere.

In addition, higher-income households are typically in a better position to spend that kind of money, which can help explain these states that are more likely to utilize credit card rewards programs. In fact, the 10 states with the highest median household incomes in the U.S. are among the top 13 states that use credit card reward programs the most. Hawaii, for example, has a median household income of $83,102 — fifth in the U.S.

Notably, the biggest outlier is the District of Columbia: D.C. has a median household income of $92,266 — tops in the U.S. — but is slightly outside the top 10 for households that utilize credit card rewards programs.

Southerners least likely to utilize credit card rewards

Southern states dominate those with the lowest share of residents using credit card rewards programs. In fact, all 10 of the states at the bottom are in the South.

But that’s not to say that residents in states with lower household incomes aren’t utilizing credit card rewards. Even in the states with the lowest rates using credit card rewards programs — Mississippi (57.4%), Louisiana (58.0%) and Arkansas (58.5%) — the percentage is still substantial. Notably, these states are also in the bottom four in the U.S. by median household income.

Relatedly, residents in low-income areas generally have less access to credit cards and lending. According to the latest data from the Consumer Financial Protection Bureau (CFPB), lower-income Americans opened credit cards with a combined lending level of nearly $1 billion in January 2018; that compares with nearly $15 billion in the same month for Americans with the highest income. There’s also a wide gap in available lending levels, according to the CFPB, between super-prime borrowers with credit scores above 720 and deep-prime borrowers with scores below 580.

How much households could leave on the table by not utilizing credit card rewards

A recent survey from social shopping platform Slickdeals found that Americans who make the most of credit card rewards save $757 a year, on average. Using U.S. Bureau of Labor Statistics (BLS) expenditures data, LendingTree analysts modeled what the typical household might be able to save by using a simple cashback rewards card.

The average household spends $61,334 a year. Of that, categories that don’t typically involve credit card rewards — housing, new vehicle purchases, health care, education, cash contributions and pensions — account for $41,909 of that annual spend. That leaves $19,425 of yearly expenditures where a cashback reward card could come into play. If researchers assume a 2% cashback reward, the typical household could save $389 a year by utilizing a rewards credit card on their typical spend.

Applying this model by state and adjusting for regional price parities, researchers determined the states where households have the most to gain from using credit card rewards. Hawaii is also at the top of this list at $463 a year, but the rest of the top 10 shifts.

As noted earlier, income is a significant factor in how much a household can save. According to BLS data, the typical household with an annual income above $200,000 spends $145,402 a year. Of that, $39,578 is spent on categories where one can usually earn credit card rewards. Assuming the same average return of 2%, the average household with an income above $200,000 can save $792 a year.

Meanwhile, households with incomes below $15,000 typically spend $28,235 a year, of which $9,657 falls into the categories researchers have selected as suitable for credit card rewards. (If you’re wondering how a household with less than $15,000 in income spends $28,235, many of these households’ residents are retired and drawing down savings).

For those households, a card with 2% returns on spending could save $193 a year — though, if researchers assume it’s based on a card with a $100 annual fee, that $193 plummets to $93.

How to make the most of your credit card spending

Credit card rewards programs can be a useful tool for saving money. In fact, the national rate of households utilizing these programs has grown since 2017:

• 61.3% (2017)
• 64.3% (2018)
• 65.8% (2019)
• 66.5% (2020)
• 67.0% (2021)

But credit cards — and these programs — can cost you money in the long run if you’re not careful.

Schulz says you could try to time a new rewards card with a big purchase — especially if you have the cash already saved up.

Still, he makes clear that rewards aren’t the most important thing to think about with your finances. Instead, he says that getting out of debt and building your credit score should take precedence before you even think about rewards.

“If you carry a big balance, you shouldn’t be worrying about rewards,” he says. “Zero-interest balance transfer cards can help you do that. You can also call your card issuer and ask for a lower APR. It works far more often than you’d imagine.”

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Methodology

LendingTree analysts utilized 2021 S&P Capital IQ Pro data to compare the number of households enrolled in at least one credit card rewards program to the total number of households by state. Researchers then ranked the states from highest to lowest based on the proportion of households enrolled in at least one program.

Analysts also estimated the amount of money the typical household could save a year by state. To do this, researchers estimated the typical amount spent per household — using 2020 data from the U.S. Bureau of Labor Statistics — across typical credit card reward categories. Analysts reached this number by subtracting the cost of housing, new vehicle purchases, health care, education, cash contributions and pensions from annual expenditures.

This left researchers with an estimate of the amount spent on credit card-friendly purchases. This number was multiplied by a regional price parity (RPP) — via 2019 data from the U.S. Bureau of Economic Analysis — to get an estimate for the typical annual spend on credit card-appropriate products by state. To estimate the potential savings, analysts multiplied this number by 0.02 in each state to reflect typical rewards from a cashback credit card.