How to Use Credit Cards to Save Money

save money


Credit cards may seem like a terrible way to save money. With so many horror stories of astronomical credit card debt and denied loans, it’s easy to understand. However, credit cards, like any tool, can be used wisely or detrimentally. If used correctly, credit cards can a great way to earn a discount through your regular purchases.

The key to using credit cards smartly is to choose a credit card according to how you spend your money currently. When you alter your spending to meet rewards requirements, you nearly always spend more money than you would otherwise. For instance, you should not accept an offer for a store rewards card unless you are already spending a significant amount of money at that particular store. Do the math to make sure the dollar amount of rewards or savings you are likely to reap is actually worth your while.

Features & Benefits

For most people general cash back rewards card is the wisest choice. If you consider the fact that you can charge most of your monthly living expenses to a 1% cash back card (provided you can pay off your balance each month), a 1% discount on almost all of your living expenses is nothing to sneeze at. As long as the annual fee for the card doesn’t outweigh your likely cash back amount, a basic cash back rewards card amounts to an automatic discount on all the things you pay for anyway.

In some cases, a store or specific-purchase (such as gas or travel) rewards card can be worthwhile. It all comes down to how you spend your money. If you typically spend a lot of money on flights and hotels, a travel rewards card might end up saving you more money than if you were to take a regular cash back offer. To decide, take a good look at how much you are likely to receive based on your current spending. In some cases, a store rewards card might beat out a cash back card in the grand scheme of things.

Reap the Rewards

Many people apply for too many credit cards in order to reap rewards and cash back, which is a mistake for several reasons. First, keeping track of multiple accounts can cause headaches, missed payments and interest accruement. Second, you can actually harm your credit score by applying for too many cards or keeping too much credit relative to your spending. Last, it’s likely that only a few very specific cards will give you the best bang for your buck in terms of your lifestyle and spending habits. In the case of rewards and cash back cards, putting all of your eggs in one basket can actually be wisest.

Final Thoughts

Credit cards are a terrific tool for saving money. However, if you wish to use credit cards as a money-saving tool, proceed with caution. Keep track of your spending, pay off your balance in a timely manner, and always do the necessary math before applying for any card.

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