With June inflation at 9.1 percent, the highest year-over-year increase since November 1981, everyone is looking for ways to save money. Here are a few examples of how credit cards can be useful.
Credit card rewards are free money as long as you pay in full to avoid interest and buy things you would have bought anyway. This year, I’m on track to earn nearly $2,000 in cash back.
The American Express Blue Cash Preferred® Card is my preferred credit card. This is primarily due to the fact that it offers 6% cash back at US supermarkets (up to $6,000 in annual purchases, then 1% cash back after that). Because my family spends a lot of money on groceries, these rewards quickly add up. Consider the following: If you’ve been paying for groceries with cash or a debit card, you could be missing out on hundreds of dollars in credit card rewards.
Similar examples can be found in other categories such as travel, dining, and gas, among others. Begin by identifying and prioritizing the areas in which you spend the most money. You can maximize your benefits by combining different cards.
The Citi Custom CashSM Card is popular because it adapts to your lifestyle, offering 5% cash back in your top eligible spending category every monthly billing cycle (up to $500 in purchases, then 1% after that). Many people appreciate that the category can change from month to month and that you do not have to pre-select it.
The Chase Freedom FlexSM and Discover it® Cash Back cards don’t offer the same level of flexibility because the card issuers choose the 5 percent categories that rotate every quarter, but they can still be very profitable. The categories are also quite broad. So far this year, the two cards have covered groceries, Amazon.com, gas, restaurants, and other expenses. It should be noted that both cards require activation and that the 5% rate is limited to $1,500 in quarterly spending (after that, purchases earn 1 percent cash back).
There are numerous other examples, so do your research to find the best fit for your spending habits. Naturally, pay in full to avoid interest. Earning 5% or 6% cash back pales in comparison to the average credit card APR of 17.25%.
Also, make sure you use your rewards. It may seem obvious, but nearly one-third of rewards credit cardholders did not redeem any rewards in 2020. You could be sitting on a lot of money.
While earning rewards on everyday purchases is great, strategically signing up for credit cards with lucrative introductory bonuses can boost your rewards strategy even further. Ideally, you’ll find a card that offers a sizable welcome bonus while also aligning with your long-term spending habits. It is important to note that these bonuses typically require you to spend between a few hundred and a few thousand dollars in your first few months with the card.
The Platinum Card® from American Express (80,000 points after spending $6,000 in your first six months), the Citi Premier® Card (60,000 points after spending $4,000 in your first three months), and the Marriott Bonvoy Boundless® Credit Card (Earn 3 Free Night Awards (each night valued up to 50,000 points) after spending $3,000 on purchases in your first three months from account opening) are among the best options available right now. The value of these reward points varies depending on the card and how they are used. Each of these items could be worth $1,000 or more.
Be careful not to open too many cards at once. I generally recommend deferring credit applications for at least six months — and this applies to all types of credit, not just cards.
Because your lifestyle and the market change, it’s important to compare cards on a regular basis. If you use the same credit card year after year, you’re most likely missing out on valuable benefits.
Online shopping websites
Stacking discounts — that is, combining multiple ways to save on the same purchase — is one of my favorite savings strategies. Using a rewards credit card, a store coupon, and an online shopping portal are some examples. Rakuten is one of my favorite online stores. I installed the Rakuten browser extension to gain quick access to discounts (such as 8 percent cash back at Nike.com and 4 percent cash back at Macys.com).
Another good one is to shop through Chase. I frequently make online purchases by going to a retailer’s website via the Chase portal. This simple action, combined with payment with my eligible Chase card, can result in an additional 15 points per dollar at Florists.com and 5 points per dollar at Samsung.com (among many other deals).
Take advantage of card-linked offers, which are digital coupons that can be loaded onto your credit card. Two prominent examples are Amex Offers and Chase Offers. I currently have two enticing Amex Offers for travel: $60 off a $300 or more Marriott purchase and $30 off a $150 or more Turo car rental. There are also numerous retail and restaurant deals. Another excellent deal is $120 off a purchase of $599 or more at Dell.com.
Promotions with 0% interest
If you have credit card debt — and according to the American Bankers Association, nearly half of active credit card accounts carry balances from month to month — your best “reward” will be obtaining a lower interest rate. This is especially true now, as interest rates are rising, making credit card debt more expensive.
Forget about cash back, frequent flyer miles, and hotel points until your credit card debt is paid off. The good news is that 0% balance transfer cards are widely available, with some of the best offers lasting up to 21 months. You can also avoid paying interest on new purchases for up to 21 months.
These promotions must be planned carefully. After the term ends, the interest rate skyrockets, so I recommend dividing your debt by the number of months left in your interest-free period and trying to stick to that payment schedule.
Avoiding interest for nearly two years is a powerful tailwind that can help you get out of debt quickly and at the lowest possible cost, especially in times of high inflation.
Credit cards, like power tools, can be extremely useful when used responsibly, but they can also be extremely dangerous when used irresponsibly. And, with the cost of living rising by the month, it’s critical to understand how credit cards can assist you financially. The strategies listed above are examples of how you can make your credit cards work for you.