Credit cards are powerful money-saving tools – if they’re used properly. When you spend money on a credit card and pay it down every month, you can enjoy some great benefits – such as points and cash back which can be spent on a variety of different products and services.
If you’re new to the world of credit cards, or you’re just interested in learning more about the best ways to get the most out of credit card rewards, you’re in the right place! Let’s discuss a few of the best tips to get more for your money, and stretch your budget!
1. Start With The Right Credit Cards
First things first, you’ll need to begin by signing up for the right types of credit cards. Not sure what you should be looking for? Here are a few examples of the 3 basic, most useful types of rewards credit card.
- Everyday cash back – These types of cards usually give you a set percentage of cash back on each purchase that you make with them. You can usually find a card that will give you 1.5% cash back, which is the industry standard. However, some cards like the Citi Double Cash card will give you 2% cash back – 1% when you buy, and 1% when you pay. It may be difficult to get this card without a great credit score, though.
- Quarterly cash back – These types of credit card, such as the Chase Freedom and Discover it card, offer 5% cash back rewards on rotating, quarterly categories. For example, they may offer 5% cash back on grocery store purchases for 3 months, and then provide 5% cash back at gas stations for the next quarter.
These cards usually also offer 1% cash back on all other purchases, in addition to the quarterly 5% rotating categories.
- “Points” and travel rewards cards – There are many credit cards that offer “points” and “miles” to users. One example is American Express. These credit cards usually offer additional points and benefits to users who book hotels, airfare, car rentals, and other vacation expenses using the card.
In general, you will want to choose credit cards in these 3 categories. You should also be aware of any potential restrictions on the use of your cash back rewards and points – read the fine print before signing up!
Finally, avoid cards with yearly fees, unless you’re sure that it will be worth your while. Those yearly fees can really eat into your rewards points.
2. Don’t Miss Out On Those Sign-Up Bonuses
After you’ve signed up for a credit card, chances are that they will offer you a promotional cash back reward for hitting a certain spending limit on the card. The Chase Freedom card, for example, offers you a $150 cash-back bonus after you spend $500 on purchases within three months of activating your card.
More expensive cards with annual fees tend to have higher sign-up bonuses. For example, the Chase Sapphire Reserve card gives you 50,000 bonus points after you spend $4,000 within 3 months of opening your account – which is a $750 value when redeemed.
Because of these sign-up rewards, it may be a good idea to apply for a new credit card when you know that you are going to spend a lot of money in the near future. For example, you could sign up for a new card before going on vacation, and put all of your expenses on that card – easily allowing you to meet the sign-up requirements!
Obviously, you should spend responsibly. But by using these sign-up bonuses to your advantages, you can really stretch your dollar, as long as you don’t overspend.
3. Never Forget To Activate Quarterly Rewards
Most quarterly rewards card like the Chase Freedom and Discover it card require you to activate each 5% bonus cash-back category on their website. You can usually do this the month before the category takes effect.
Don’t forget to do this. If you don’t activate the reward category before the deadline comes, you won’t be eligible for the additional cash back during that quarter – so you’re essentially leaving money on the table.
4. Buy Discounted Gift Cards With Quarterly Cash Back Rewards
Quarterly cash back cards like the Chase Freedom and Discover it card often have bonus categories at websites like Amazon, as well as Costco and other warehouse clubs like Sam’s Club, and grocery store chains.
In addition, they have a quarterly spending limit, usually of $1,500. You can only earn additional cash back up to this limit – and if you don’t hit the spending limit, you’re not maximizing your credit card rewards.
So, how can you make sure you spend the full $1,500 on these categories? By buying gift cards! Websites like Amazon.com sell gift cards, and most grocery stores sell gift cards to dozens of different stores.
If you simply purchase gift cards to your other favorite stores using your quarterly rewards credit card, you can get 5% cash back on things you would have bought anyway.
For example, if you are looking to get a new TV, you could buy a $250 gift card to Best Buy at a grocery store during a 5% cash back quarter – and you would get $12.50 back on the purchase of the card. Essentially, this means you’ll get a 5% discount on an item you would have bought anyway!
Again, though, you should shop responsibly when buying gift cards using quarterly rewards. Don’t simply buy gift cards that you won’t use, just to maximize your cash back rewards. If you do this, you may end up with useless gift cards, and their value will go to waste unless you sell the gift cards online on a gift card marketplace.
5. Shop Through Online Credit Card Portals
If you’re in the mood for some shopping, you should make sure that you visit your credit card’s online shopping portal first! Credit card companies like Discover, American Express, USAA, and other partner companies of VISA and MasterCard usually offer online shopping portals.
On these portals, you can qualify for special rewards, such as a certain percentage off of consumer goods, or extra cash back when shopping online. Discover, for example, currently has a deal for 5% off of Target purchases over $50.
This is especially handy for travel rewards credit cards. Travel credit cards like Chase Sapphire have dedicated travel portals, through which you can book airfare, hotels, and other travel necessities. By doing so, you can often earn up to 50% more points – which means you’ll save money in the long run.
While you may not always find a deal that you need, it never hurts to spend a few minutes browsing these online shopping portals – you may just be able to save some extra cash!
6. Set Up Credit Card Autopay On As Many Bills As You Can
Ideally, you should pay as many of your bills as possible on a rewards credit card, rather than using a debit card, or a withdrawal directly from your bank account. Setting up autopay on your bills essentially gives you a 1.5% or higher discount, if you’re using the right credit card.
In addition, some quarterly rewards cards offer additional cash back on cell phone bills, internet service, and other such utilities. You can usually use your credit card to pay bills such as:
- cable/internet/satellite TV
- Netflix, Spotify, and other subscriptions
- Health insurance
- Car insurance
By paying these bills with your credit card, you can save a few dollars each month – and put that savings towards something special!
7. Never Carry A Balance On Your Credit Cards – Always Pay In Full
If there is one tip that we must emphasize above all others in this article, it’s this one. Never carry a credit card balance. Period.
Most credit cards have an APR (Annual Percentage Rate) of 12-25%, depending on your credit score. This means that failing to pay your monthly bill in full can easily wipe out several months of credit cards rewards cash.
What do we mean? Let’s say that you’ve got a rewards credit card with 1.5% cash back. You have a $1,000 credit card balance at a 20% APR, and you pay a $200 minimum payment, because you don’t want to pay the card off in full.
For the next month, daily interest will be added and compounded to your bill. You’ll end up paying a total of $53.14 in interest if you choose to pay the bill in full the next month – and if you pay the minimum again, interest will continue to build.
This means that, by failing to pay your credit card off completely for just one month, you’ve wiped out the cash back that you gained over about $3,500 of purchases. You may need several months in order to regain that money – and make your credit card worth using again.
Responsible credit card use is absolutely key to maximizing credit card rewards. You should only use a rewards credit card if you already have the money to pay for a purchase in cash – never buy things you can’t afford just to get more points or cash back. If you do so, you’ll end up paying for it, in the long run.
8. Don’t Overdo It By Opening Too Many Accounts
Once you’ve opened a few different credit cards, and you have gotten an idea of how much money you can save just by shopping wisely, it may be tempting to start opening new credit card accounts.
We get it – it feels good to know that you’re always earning maximum cash back on every purchase! But don’t overdo it. Typically, you only need 3-4 credit cards to make hundreds of dollars in cash back every year.
Adding more credit cards just makes it harder to keep track of your bills – and it’s not usually worth the effort.
In addition, opening too many credit card accounts in a short period of time may damage your credit score. Seeking new credit is often seen as risky behavior by lenders – so this can make it hard to get a loan for a car, or a mortgage.
Do a little bit of research to find the right credit cards for you, and stick with just a few of your favorites. Don’t know where to start? Check out some of the below resources from NerdWallet!
Using these comprehensive guides, you can quickly see which cards you are eligible for – and take the first step towards maximizing your savings with rewards credit cards.
Follow These Tips And Get More For Your Money!
Whether you buy gift cards to maximize your quarterly cash back rewards, or use a new card to earn a massive sign-up bonus after a vacation, these smart money moves will help you optimize your spending. Just remember to spend wisely, use the right rewards cards, and avoid making minimum payments!
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