When you pull up to the gas pump or stand in line at the grocery store, how do you choose to pay? Some consumers pay cash for everything they can, but according to recent surveys, more consumers are using their cash back credit cards to earn rewards on purchases that they have to make anyway. In a way, it’s like double-dipping because you are getting the gas in your car or the food on your table that you need and you’re racking up points with your credit card issuer that you can cash in for more things that you want.
The majority of cash back rewards cards pay cardholders pay cardholders 1 percent back—making this the most popular type of card. According to a recent survey by Credit-Land analysts, 25 percent of cash back credit card issuers pay as much as 2 percent in rewards for travel, gas and grocery purchases.
Charge, Earn, Pay Off
Whipping out your cash back card to make purchases sounds ideal, especially when you see what kinds of prizes you can cash your reward points in to earn—electronics, trips, cash and more. The key to charging purchases to earn as many rewards points as possible is to remain in control of your spending. Avoid charging items that you can’t afford to pay off at the end of the month when the bill comes. If you’re simply charging up a storm to rack up your points, you can easily find yourself in credit card debt, with a plummeting credit score and future credit problems.
[Free Resource: Check your free credit report and score]Wise Consumer
When you take a strategic approach to using your rewards credit card, you can easily come out on the winning end of the deal. Do not allow the rewards card to change your spending behavior. Instead, substitute your cash purchase with the card that pays you reward points, but earmark the money in your bank account to pay off the credit card when the statement shows up. Also, consider the type of rewards your credit card pays. Some credit card issuers give you cold hard cash. Other companies deduct the reward amount from your balance. Still others allow you to exchange points for merchandise, so instead of buying that new TV with cash, you can turn your points into a source of entertainment.
Get to Know Your Rewards Card
The key to leveraging the benefits of your cash back or rewards card is to get to know the ins and outs of how the program works. Only when you have a full understanding on which types of purchases pay you the most in rewards can you create a plan to get the most out of the program. For example, if you know you earn double points for gas and groceries, use the card for these types of purchases. Keep track of special promotions on statements and inserts, where you can earn additional bonus points for the promotional period.