Cash-Back Credit Cards: 3 Secrets to help maximize your money

Estimated Monthly Savings: $20

Cash-Back cards are great, if and only if you know how to use them properly. Understanding the reward structure of these commonly available but highly desirable cards is essential to making the most out of their usage. Put simply, the secret to getting maximum value out of your cash-back card is to use it for the right things, and sometimes at the right time, while keeping your finance charges minimal.

Build Your Credit Score Fast

The key is not to work up a charge, but to run money you’re already spending through the rewards card. This adds one extra step between your bank account and expenditures, and gains you back a percentage of everything you spend! While you can always use this little bonus to reward yourself for wise finances, you can also pay the card off with that bonus. The combination of savings and card usage are sure to have a beneficial effect on your credit score, whether you’re using the redeemed cash-back ‘points’ to lower your effective monthly payments, or delving into the complex promotional offerings typically bundled with this type of card.

The Right Rewards For You

Pick a card and package that rewards your lifestyle. According to Forbes, you should “find a card that pays more than 2% in one or two categories where you spend a lot of money”. For the jet-setter, some cards offer high percentage rewards for travel or restaurant expenses, while “cards that pay as high as 6% at grocery stores” are a great choice for any homemaker or chef. Make enough purchases in the ‘sweet spot’ for your particular card, and you can easily offset small ‘carry-over’ finance charges. Some card savvy people even choose to carry a variety of specialty cards to suit the circumstances of each purchase.

Household Savings

For some people, the most straightforward use of the ‘cash-back’ card will be to add savings to nearly every purchase. If you have a ‘universal cash back’ card, the simple action of processing your monthly expenditures like bills, groceries, utilities, school expenses, car maintenance, and other household costs through the cash-back card could result in serious savings! For an average American household and according to the Bureau of Labor Statistics an annual savings of $250 could be easily obtained by simply routing the majority of costs through a cash-back card. This number increases significantly if the card offers any sort of ‘Bonus Rewards’, potentially doubling or tripling the effect of purchases for certain services or from certain merchants.

Processing your monthly expenses through a cash rewards credit card can help build your credit score and your savings at the same time. Researching reward cards that suit your lifestyle could be the next great financial decision you make.