Let’s talk about credit card rewards. But first, let’s talk about mindset. It takes a different mindset to make money verse saving money. Making money is all about adding value to others, while saving money is about making your dollar go further and often delaying instant gratification. The trick to savings is getting to a point where it is automatic. Making the dollar go further however, is about being creative and using the various tools at your disposal. One of them being credit cards. Credit cards can be one of your best resources for helping your money go further. To that point, I live off my credit cards and try to put absolutely every purchase I make on them.
Credit Card Rewards
Credit cards are fantastic because of the rewards they give back. Every dollar you would spend anyway can go towards enhancing your lifestyle. It could be points for a hotel stay, free flights, cashback or much more. What is great about these rewards it that they do not cost you anything extra if you use your credit card correctly.
So here is how I use my credit cards and how I suggest others do the same.
First things first, if you buy anything on a credit card you must be able to pay it off immediately. This is by far the most important part of all of this. This isn’t new advice, but it is solid advice. If you cannot pay off the monthly balance every month then this strategy is not for you and you should stick to a debit card or cash. (Although, credit cards are a much easier way to track spending than using cash).
What I do is set up the payment to come out automatically every month and pay the statement balance in full. Yes, all of it. Every last penny. This makes it really easy not to forget to take care of it at the end of the month.
Any bills that will allow me to pay with a credit card I will set it up to pay them automatically with the card. Utility bills, gym memberships, home remodeling projects, business expenses, I even go as far as doing my charitable giving with my credit card when it allows.
The surprising thing is that the more available credit you have and do not use helps improve your credit score. Some experts believe you should only use 30% of your available credit. But honestly the more available credit you have the better, so do not hesitate to call your credit card company once or twice a year to ask for a limit increase. Remember, credit card companies compete ferociously with each other, this can really benefit you.
Also, be sure to watch out for companies charging you a processing fee for using a credit card. This is usually a case-by-case basis, but you need to make sure the points or rewards you are getting are worth any extra fees. For example, the DMV wanted to charge me 3.25% for using a credit card, but I would have only received 2% cashback… in this case, I wrote a check.
Picking the best Credit Card Rewards
Today it seems like there is an unlimited number of types of credit cards you can get and each one has different rewards and benefits. Some are for travel, some are cashback, and some are store-specific rewards. It can be confusing. Luckily, Money did a nice article about which cards are best in a variety of categories, check it out here: The Best Credit Cards of 2020.
Picking a card can be tricky and you need to think about how you spend your money to pick the best one. I personally like to use the rewards for travel. Well, when we can travel. (Thanks COVID) It is such a great feeling to stay at 5 Star hotel and not pay for it or get a night in the mountains during peak season ski sea for free.
It is also fun to fly for free. My family and I usually get a least one free vacation a year. Currently, I am stockpiling my points until some of the travel bans are lifted but plans are in the works. Ask yourself how you spend money. I have had clients use their points for new gear at REI, grocery runs at Costco or even Disney World tickets. Which is going to add the most value to your life. Keep it simple though, pick 2-3 and stick with it. Too many credit cards can get difficult to manage.
It really is about getting more for your dollar. Because you pay off the balance each month, you do not incur interest charges or extra expenses. When I buy things on a credit card I am not spending more or buying things I would not normally buy. These rewards allow me to save more money and still get the lifestyle I want. It is like the best life hack. Having the right credit cards can help you live a richer life!
Squeeze even more out of your credit cards
Points and rewards are an obvious no-brainer. However, there are also some other advantages of paying with a credit card that are often overlooked. Some can give you longer warranties and insurance on your purchases. Many have great purchase protection options, far better than any debit card. Some can provide trip cancellation insurance and/or car rental insurance. Plus, if you are lucky concierge services. Many services can help you plan your next trip, arrange for concert tickets, or even land a sought-after restaurant reservation. Think of it as your own personal assistant.
The list is long for the benefits of using credit cards to buy your everyday items and I only scratched the surface of how to maximize them. Credit cards can be a wonderful tool but use them correctly and responsibly. With great power comes great responsibility, or something like that! Now go forth and get those rewards.