CREDITBUDGETINGLIFESTYLE & TRAVEL

How to Strategically Get Cash Back

Credit cards can not only be a great tool to build credit but can also be a way to earn rewards, like cash back. Not all credit cards are created the same so it is important to do your research to understand what fees, interest rates, and policies come with the card.

Credit Card Basics

Credit cards are loans which if opened will have a set limit. Payments on a credit card may never be the same from month to month and depend on if there is a balance and how much is owed. One trick to using credit cards to help build your credit score, is to pay the statement balance in full each month. This is a way to add payment history to your credit report, each month, and comes with the added bonus of not having to pay any interest. When you pay the full statement balance as your credit card cycles, there will be nothing left to assess interest on. However, if you only pay the minimum payment or anything less than the full statement balance amount interest will be assessed on whatever amount has not been paid.

Picking Out the Right Card

Not all credit cards are the same, especially when it comes to rewards. Interest rates will vary based on the types of rewards and there also may be an annual fee to pay on some cards. With rewards credit cards, you could receive a certain percentage cash back on all purchases, tiered percentages based on what you are purchasing, miles to purchase airfare, or certain discounts when using points with certain companies. There will also be policies on minimum amounts needed to redeem rewards, some cash back cards you have to wait for a minimum amount like $25 to use cash out your rewards. Before applying and opening a credit card do your research to understand all the ins and outs of the card so you can select one that will work best for your lifestyle.

What to Charge

If you are newer to using credit cards it can be helpful to create some boundaries on sorts of things you use a credit card to purchase. Some people start will only charging one bill, like a monthly subscription, on their card each month to be sure they are able to pay it in full. Others will only uses a credit card on an area they can earn more rewards, such as gas or groceries. As a student you can take advantage of times in the semester when you may be buying more, like when purchasing textbooks, to earn more points. However you create your boundaries, keep in mind it can be easy to spend more than you earn, which can lead a vicious cycle of credit card debt, so it is important to maintain disciplined.

Using Cash Back

Once you start earning rewards or cash back, there are many ways that you can use it. Some people deposit all of their cash back money into a high-yield savings account, others save it all to purchase gifts during the holidays. Cash back can also be great for making extra payments on other loans you may have. If you receive travel miles or points, those can be saved up for fun vacations. The ways to use credit rewards are endless and can add some fun into your spending plan to help you reach your financial goals.

Sources:

• https://www.nerdwallet.com/article/credit-cards/make-most-rewards-credit-cards
• https://www.bankrate.com/finance/credit-cards/how-cash-back-works/