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I know the use of credit cards is a common debate within the financial world, but personally, I love credit cards.
I use them for just about every purchase because I like to take advantage of the points, promos, and cash back rewards.
I’ve paid hundreds, possibly even thousands in interest in the past, and my goal is to earn that all back from the banks, and then some.
Let’s discuss how to use your credit cards strategically to earn the most money:
If you aren’t responsible with money or have a spending problem, using credit cards is probably not the best thing for you.
You may even want to hold off on using your credit cards if you still have credit card debt.
These tips are for you if you plan on using your credit cards for necessary purchases and are able to pay off the balance before any interest accrues (avoiding revolving debt).
Find the right card(s)
If you only have a student credit card or cards that offer low rewards, then you may want to consider opening a new one.
You should only do this if you have a strong credit score, your debts are under control, and you are financially responsible.
To start, find a card that is offering a good promo.
For example, Chase is offering $200 cash back after spending $500 in the first 3 months. This is a great return AND can be easily achieved.
Some cards offer more money but require you to spend more money.
For example, a card may offer $500 after you spending $3,000 in 3 months. Personally, I know I probably won’t spend $3,000 in that amount of time so I wouldn’t choose that card.
The second thing to consider are the cash back opportunities.
If you can get 2-5% cash back on common purchases (gas, groceries, travel, etc.) then that is usually a good card.
Again, the Chase cards I mentioned above also come with 5% cash back on groceries for the first 12 months, 5% on travel, 3% on dining, and 3% at drugstores.
Avoid cards with an annual fee
I prefer to avoid cards with an annual fee because the points I would earn probably wouldn’t cover that fee (usually $95+).
However, if you have large, necessary, recurring expenses those still may be worth it for you!
Check your pre-approval odds
Before applying for a card, check your pre-approval odds.
Pre-approval usually means that you meet a certain criteria determined by the lender. However, pre-approval is not a 100% guarantee and if you apply and get denied, this will still hit your credit.
Keep track of cash/point offers
Once you have your card/cards, be sure you meet that spending requirement to get your bonus.
You’ll also want to remember what each card offers so you can use the card that offers the best rewards each time you spend money.
For example, I use my Chase card to earn 5% on groceries. But I use my Bank of America card to earn 3% on online shopping. Then I would use my Capital One card to earn 1.25 points at a discount department store such as Home Goods or Ross.
It may take some time to remember to use the right card, but this is how you earn more.
The other thing to look out for are deals offered.
Most credit cards have a ‘deals’ section that offer much higher earnings at specific restaurants, stores, and services.
Check out some of the offers through my BOA Cash Rewards card:
By activating these days you can earn way more bang for your buck.
It’s wise to check these out before going shopping or out to eat, then you can plan based on any offers.
Use credit cards for all necessary purchases
To earn the most money, ALWAYS use your credit card for necessary purchases that don’t charge a fee.
For example, I can’t use my credit cards to pay my rent or car loan. Obviously, I would earn a lot of cash back, but I would also be charged a large fee and it wouldn’t be worth it.
Outside of that, you can use your cards to purchase gas, groceries, travel, home renovations, business expenses, gifts, services, etc. and then pay the balance immediately/once it processes.
You will earn your cash back and you won’t pay a dime of interest.
Charge your work expenses (get reimbursed)
If you need to travel for work and/or make a purchase, see if they will allow you to purchase and then get reimbursed.
That way, you make a large purchase in a high earning category (travel) and earn a large amount of cash back. You will then be reimbursed but still have your extra rewards!
The main cards I use
- Earn $200 after spending $500 in the first 3 months
- 5% cash back on groceries for 12 months
- 5% on travel, 3% on dining, 3% at drugstores, 1% everything else
- No annual fee
- Earn 20,000 points ($200) after you spend $500 in the first 3 months
- Earn 1.25 points per $1 spent
- No annual fee
- $200 cash reward after spending $1,000 in the first 90 days
- Earn 3% in category of your choice (dining, online shipping, gas, travel, etc.)
- Earn 2% back on groceries, 1% on everything else
Using credit cards strategically is definitely worth it if you are smart and responsible with your money.
You can earn a lot of relatively passive income with minimal work.