How to Maximize the Benefits of Your Cash Back Credit Card
A cash-back credit card can provide lucrative rewards if used wisely. However, you could have more debt and interest charges than bonuses earned if you are more careful. Cash back cards typically offer simple redemption options like statement credits, checks or direct deposits into your bank account. Here are a few tips to help you get the most from your card:
Don’t Redeem for Statement Credits
Some credit card issuers let you redeem your rewards for statement credits that decrease the amount you owe on your credit card account. However, it doesn’t count as a credit card payment, so you must pay the full balance when it’s due. Additionally, you can exchange your rewards for gift cards from other merchants or cashback added to your balance. You can convert your reward dollars from some credit card issuers into travel points that can be used to book travel and lodging. Maximizing your rewards with cash back cards requires careful planning and spending habits, but it can be worth it if you want to earn extra money for the things you buy every day. Just be sure to avoid overspending and carrying a balance so you don’t rack up high-interest rates and ruin your chances of racking up long-term savings.
Keep Track of Your Spending
Tracking your spending is a simple way to get the most out of your cash-back credit card. Use an expense tracking app to record purchases as you make them, or use a spreadsheet to document each dollar amount as you spend. Some card issuers even offer shopping portals through which you can earn additional rewards at certain retailers. Once you have a handle on how much you’re spending, categorize those expenses by the categories that your cash back credit card offers rewards in. It can help you see how you spend your money and may inspire changes to your habits. You can often use statement credits, direct deposits into your bank account, or checks to cash in your cashback incentives. You can also save your rewards for gift cards, which can be a good option for stockpiling gifts for yourself or others. You can even use your cash back to pay down debt or invest.
Overspending can quickly cancel out the benefits of a cash-back credit card. When making purchases, only use funds available in your bank account immediately. It will prevent you from accumulating debt and help you stay on track to meet other needs and savings goals. Choosing a credit card that matches your spending style and rewards you for the purchases you typically make is also important. For example, if you’re a heavy spender in specific categories, like grocery stores or gas stations, look for cards that offer bonus-earning opportunities.
You can redeem your earned cash back in a few ways. You may also trade your rewards for gift cards from different shops or cash back that will be added to your account. Some credit card companies allow you to exchange your reward dollars for travel points that may be used to book travel and accommodations. Some cards also allow you to transfer the rewards to your bank account or use them for gift cards. It’s also a good idea to pay attention to special offers from your card issuer, which can offer additional cash back in select earning categories for a limited time.
Pay Off Your Balance in Full Every Month
A credit card with cash-back benefits allows you to earn rewards on your routine transactions. Cardholders typically receive a percentage of their total spending on all qualifying purchases, though some cards offer better rewards rates in specific categories like travel, restaurants and groceries. Some cards even allow you to redeem rewards for gift cards, charity donations or loan payments. Raising dividends, however, can only be advantageous if you pay off your bill in full each month, given that the typical credit card APR is greater than 20%.
Spending time is also important, as this can damage your credit utilization and lead to debt accumulation and interest charges. In the end, selecting a cash-back credit card that matches your spending preferences is the best way to use one. You can do this by comparing tiered and flat rate cards to see which fits your needs best and consider looking for card offers with 0% APR for purchases or balance transfers for a limited time.
Don’t Forget About Expiration Dates
Credit card expiration dates seem a nuisance, but they serve important purposes. They help ensure that your card will be in working order when you need it and provide critical protection against fraud. So, it’s worth checking for a replacement in the weeks leading up to your expiration date. The credit card expiration date is printed as a two-digit month and year, and it’s typically the last day you can use your card for purchases. Depending on the rewards structure of your card, you might also have to sign up or activate a new category of assets to earn additional cash back. As you might expect, credit card expiration dates are included in your card’s terms and conditions for fraud prevention. These dates give payment processors one more piece of information to cross-check and verify when a transaction goes through, which helps to make it harder for criminals to take over your credit card to make unauthorized purchases online or on the phone.