Cash is Dead - Credit Cards Reign!
Did you know, that you are missing out on free money every time you purchase something with cash or your debit card? In this day and age, credit card and retail companies are doing whatever they can to earn your business. To gain competitive advantages, these companies are offering reward programs to incentivize consumers to choose their credit card or shop at their store. With this competition, you, the consumer, can select which credit card suits your interests to maximize rewards.
How to Maximize Rewards
Based on your lifestyle, you can maximize your rewards with a certain credit card or a combination of multiple. Below are some examples that may relate to you.
If you are a frequent traveler, there are cards that will offer you airline miles and a large bonus when you spend a certain amount of money. For example, the Cash Sapphire Preferred® card offers 2X points on travel and dining at restaurants worldwide and one point per dollar spent on all other purchases. They also offer a 50,000 bonus after you spend $4,000 on purchases in the first three months from opening the accounts. That is a whopping $625 toward travel when you redeem your points! There are also airline-specific cards like the United℠ Explorer Card that offers 40,000 bonus miles after you spend $2,000 on purchases in the first three months of opening the account. You also earn two miles per $1 spent at restaurants and on hotel stays. For hotel stays, Marriott, Hilton, IHG/Holiday Inn, and Hyatt all offer credit cards with reward programs. So if you are one of those people who are biased towards a hotel, it’s a no-brainer to get their credit card.
If you spend a lot of money at the grocery store each week, the Blue Cash Preferred® card from American Express is the right one for you. They offer 6% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1% above that) – that means spending $100 a week at the grocery store could earn you over $300 back per year. Not only that, but you also earn 3% cash back at U.S. gas stations and at select U.S. department stores; making this card a great one for families.
If you are a college student and want to start building credit, there are cards offered for students specifically. For example, the Discover it® Student Cash Back card will match the cash back for new cardholders at the end of their first 12 billing periods, and students who maintain a 3.0 GPA are eligible for an annual $20 credit. The Journey® Student Rewards card from Capital One® gives you 1% cash back on all purchases and an extra 0.25% cash back when you pay your bill on time as a bonus to promote responsible use. There is also a card for international students, the Deserve® Edu Mastercard for Students, which gives you 1% cash back on all purchases (domestic and abroad) and they give you a credit for a 12-month Amazon Prime Student subscription. In addition, unlike most cards, it is possible to qualify without a Social Security number or a U.S. credit history.
If you do a lot of shopping in one place, more than likely, it will offer a credit card that could save you more than a general-purpose credit card. For example, there’s the Amazon Prime Rewards Visa Signature Card, that gives you 5% back on all Amazon.com purchases, 2% back at restaurants, gas stations and drugstores, and 1% back on all other purchases. There’s also the Target REDcard that gives you a 5% discount on all Target purchases and free shipping on most items. For home improvements, Lowe’s offers a card with 5% cash back on all purchases. For wholesale club shopping, Costco offers a card with 4% cash back on gas purchases (on up to $7,000 annually, then 1% above that), 3% cash back on restaurants and travel, 2% cash back on all Costco purchases, and 1% cash back on all other purchases.
Keep in mind that since these are credit cards, if you do not pay off the entire balance each month, you may be charged interest, which will likely cost you more than any rewards you might receive. If you find that you tend to overspend, then using cash or a debit card might help keep your spending in line with your budget.
If you need help in deciding which credit card is best for you, the folks at NerdWallet created a questionnaire that will recommend you a credit card based on your answers. Try it in the link below and see what they recommend for you!
If you’re not thinking about maximizing your credit card points based on your lifestyle, you are doing yourself a disservice. Remember the old saying, “A penny saved is a penny earned?” Well, I think that saying is a bit dated and it should now be, “A point saved is a point earned!” Put the cash away and start earning points!
Presented by John Wittlesberger, CFP®