From credit card rewards to sign up bonuses and more you CAN save money using credit cards. Keep reading to find out how…
According to data from the first quarter of 2021, the average American has $2,780 in credit card debt, which is fourth among the biggest types of debt in the country. Further, credit card debt is considered bad debt because of high interest rates, which makes it difficult for consumers with poor cash flow management to clear their credit card debt.
But when used responsibly, credit cards can actually help consumers save money. Here’s how:
Sign-up bonuses, also called welcome offers, are used by credit card issuers to entice people to apply for new cards. These are typically additional points or cashback. However, Forbes adds that there are other kinds of bonuses available for those who get a new credit card. These include waiving the annual fee for the first year and getting a discount on a current or future purchase.
That said, there might be other requirements for earning these bonuses, aside from spending a certain amount in a limited time. The simplest ways to get a bonus is when you open an account or when you make your first purchase with the card.
Take note that different credit cards from different providers will have their own terms and conditions for sign-up bonuses. As a consumer, it is your responsibility to read the fine print and carefully consider whether the purchase—and the new credit card—are worth the charge.
Credit Card Rewards are specific to the bonuses earned when you make a purchase with a credit card. You can redeem these in different ways, depending on the kind of card you use. An article on the personal finance site AskMoney notes that rewards can fall into three categories: cashback, miles, and points.
Cashback, as the name suggests, lets you get some money back on your purchases. Miles credit cards are best for travelers as it lets them earn reward miles that can be used to buy airline tickets, pay for hotel bookings, and other travel expenses. Points are perhaps the most common, falling somewhere between miles and cashback. These are earned for every purchase you make, and can be redeemed for anything from cashback to travel.
Lower cost of loan
This is very handy if you have to pay for a mortgage, but this is only applicable if you have a high enough credit score. A fair credit score is the standard to get a loan, but having an excellent credit score means you can be given better terms on that loan.
For example, the 580-670 range is a fair score, and can qualify you for some loans, like auto loans and personal loans. However, an excellent score of at least 760 will give you lower interest rates on your mortgage as well as higher credit limits.
Our How You Can Build Credit with a Credit Card article actually tackles this: to get a good score, you need to pay in full and on time, manage your credit utilization rate, and keep your balance low. If you want to know more, Americans are entitled to a free credit report every 12 months. Be sure to request yours from all three bureaus once a year to keep up with your credit.
Price and purchase protection
These are perhaps the least known credit card benefits. Price protection is rare, but it essentially means that if you buy something using your credit card and you happen to find it available for a lower price within a set timeframe, your credit card issuer will refund the difference.
Sometimes, the issuer will even help you look for a lower price. Time’s feature on purchase protection explains that this benefit is a kind of insurance, if what you bought breaks or is stolen.
You can get reimbursed for the item even if the date to return it has passed, as long as it falls within the credit card’s set timeframe — which is typically 90 to 120 days from the time of buying. The amount that can be reimbursed also depends on the credit card you have, but you can often get up to $10,000 per item, with a maximum coverage of $50,000 per year.
Sign-up bonuses, rewards and points, better loan deals, and price and purchase protection are some of the ways credit cards can pay you back. With responsible use, you can actually use your credit card to save you money.