While there was a time when credit cards were used to make large purchases and push off the balance, there are a few better ways to use cards these days. The cash-back option is now the smartest way to use a credit card today, where you can earn “free” money just for shopping as you usually would.
Cash-back credit cards, first introduced in 1986 with the Discover Card by Sears, have taken the credit world by storm. The idea that you can earn money back, often with no limit and no timetables, has made it super attractive to use this type of credit card and earn as much as possible with a few helpful tips.
Take Advantage of Sign-Up Offers
First and foremost, if you’re looking at a new cash-back credit card, taking advantage of a sign-up bonus should be the first thing you do. In many cases, you can spend as little as $500 in the first 3 months or as much as $3,000 and earn between $200 and $300 in cash-back rewards.
Right now, one of the most popular card options offers a $250 bonus if you spend just $500 in the first three months. This couldn’t be any more attractive of an offer as there is a good chance you’ll go well past the $500 minimum if you’re anything like me.
Using Multiple Cards
This tip may be a tough sell for some people who want to limit the number of credit cards in their wallets, but using multiple cash-back cards can help you boost your cash-back bonus. In this case, you might want to use a cash-back card that gives you 6% for every grocery store visit.
In these cases, you can quickly rack up reward dollars if you spend just a few hundred dollars monthly at a grocery store. In addition, you can utilize a cash-back card that gets 3% back on restaurant and take-out orders and another card that offers 3% cash-back at gas stations.
Using this strategy, you can create a wallet that maximizes cash-back rewards and earns the maximum monthly money.
Look At Rotating Categories
This tip undoubtedly involves using multiple cards, but a few popular credit cards offer rotating cash-back categories. You can consider using just one credit card for a specific shopping purpose, like groceries, online shopping, or gas stations, and earn 5% for three months.
If you partner a rotating category card with other cards in your wallet, you will likely earn the maximum cash-back rewards yearly. Assuming you max out the amount of $1,500 in spending every quarter with one of the card options that offers this bonus level, you’d earn $75 per quarter, or $300 in cash-back bonuses, just by using these cards every quarter where possible.
Track Your Spending
While many of the most common tips around using cash-back credit cards surround looking at the cards themselves, it’s okay to step back and see exactly where you are spending. If you can break down your budget based on where you are paying the most, like a grocery, Amazon, Target, Walmart, etc., you can put together a wallet of cash-back cards to help you maximize your earning potential.
Shopping Portals
Another underrated tip that often flies under the radar is using the shopping portal from the credit card company of your choice. With hundreds, potentially even thousands of stores available, you can look at card-linked offers that often come with cash-back bonuses from the retailers themselves, which can go right to the cash-back balance on your card.
Redeem As Statement Credit
In my case, we often use cash-back rewards to help purchase gifts for the family around the holiday season after collecting them all year, but this isn’t the right path for everyone. A very smart tip suggests using your cash-back rewards to help pay down your statement balance. It’s basically “free” money, so whatever you apply to the balance is money you aren’t paying out of pocket.
Reminder: Pay On Time
If you’re able, paying off the cash-back balance of your credit card every month is the ideal scenario, but even if you don’t pay the entire balance, make sure you pay on time. The last thing you want is to collect a lot of cash-back rewards only to earn interest that negates all the work you have done for rewards.
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