This Cash Back Tip Could Save You Hundreds Each Year
Looking to join the credit card game? You probably already know that there’s a lot to consider before you open (or close) a credit card, but it’s important to know what each card could offer you and your lifestyle. Once you’ve run through the basics on credit cards, you may feel ready to jump right in, but we want to stop you right there. There’s something else you may not know — that if you use your credit card correctly, you could actually save some money. How? Friends, it’s called gaming the cash back system.
Pay attention to your spending patterns.
Before you apply for a single card, you need to examine your spending habits. Take a look at your accounts and even consider downloading a budgeting and expense-tracking app that can help you compartmentalize your purchases into categories, like travel, food and retail. Once you identify where most of your money goes, you can start looking at cards that offer cash back rewards specifically in those categories.
Know which card will best fit your needs and lifestyle.
After doing some research on the best credit cards and rewards out there, you’ll notice that some of them specialize in general cash back, like the Capital One® QuicksilverOne® Cash Rewards Credit Card, which gives you 1.5 percent cash back on every purchase and includes a not-too-shabby $39 annual fee. Some of these cards, like the HSBC Cash Rewards Mastercard®, even offer a 10 percent bonus on all cash rewards annually and have no annual fee. If you spend your money equally throughout a number of categories, you could benefit from a card like these.
Then there are the cards that offer cash back on rotating categories, meaning that one month you may be able to earn cash back on gas, while the next month’s earnings will be on groceries. The Chase Freedom® Credit Card, for example, offers 5 percent cash back on specific purchases, depending on the rotating schedule, and with no annual fee. From January to March, Chase will give you 5 percent back on gas, and from April to June, you’ll receive 5 percent cash back on another category. A card like this is another great option for those who spread out their purchases among multiple categories, though you could be missing out on cash back opportunities depending on the rotation schedule and depending on whether you use your card for the featured category. Another card, the Discover it® – Cashback Match™, offers a similar 5 percent cash back system with a different rotating schedule and no annual fee, but Discover will match every dollar of cash back that you earn in the first year. Pretty cool, right?
Finally, take a look at some of the cards that you may be interested in if you spend more money in some categories than others. The American Express Blue Cash Preferred® Card offers a whopping 6 percent cash back on all U.S. supermarkets and gas stations, though the $95 annual fee is fairly steep. If you spend a lot of money on groceries and gas, the card (and that fee) will be worth the investment. If you’re a traveler, the AAA Member Rewards Visa Signature® Card offers 3 percent cash back on airfare, hotels, car rentals, cruises and more for no annual fee. Want a card that will give you the freedom to choose the categories you’d like to apply cash back rewards to? Apply for the U.S. Bank Cash+™ Visa® Card, which allows you to get 5 percent cash back on your two chosen categories every quarter, like fitness and restaurants, and 2 percent cash back on one everyday category, like gas and groceries, for no annual fee.
Our last piece of advice?
Consider applying for two cards. You may not want to do this if you already have a handful of cards, but if you don’t and you want to maximize your cash back potential on two separate categories, choose two cards with the highest percent cash back rate and run with it. You could see some serious savings and — yep — game the system.