What extra financial benefits are you getting from your ordinary spending? When you pay for them with a credit card, and pay the entire balance off each month, then there are many credit card benefits to choose among: cashback, points, miles, or charitable donations.
How to decide among the dozens of card programs? First, you need to get an idea of which rewards are the most important to you: airline miles to Hawaii for a vacation, hotel points for upgrades, college savings for your kids, straight cash back, or several others.
Second, you need to funnel as much of your spending through your credit card as you can. This can be more a little more complicated with cashback cards. This is because they cashback cards commonly reward different cashback rates based upon what type of expense it is: groceries, gas stations, pharmacy, or a specific store, etc. In this case, map out your common spending pattern to determine which cards offers the highest rates on the categories that you use the most. Another complication is that some rewards points are capped at dollar amounts for certain categories, so you’ll have to switch to another card once you have reached a cap on a high-reward category.
In addition to reward points or money, when you make a purchase with a credit card, then you normally get several more benefits over paying with cash:
- Price Protection, allows you to apply for a refund if the price falls after your purchase
- Extended Warranty, an automatic 1-year product warranty or adding a year if you purchase 1 year.
- Dispute Rights, another party in between you and a retailer if there is a problem.
- Travel Benefits, free car rental/collision insurance, travel insurance, discounts on car rental, etc.
Call your credit card company to be certain which additional benefits they offer and how to use them.
You are going to be spending money throughout your life so you might as well funnel those expenses through a credit card that provides you the most financial benefit from what you are already doing. I’ve received around $2,500 in credit card cashback rewards over the couple years in addition to 2-free first-class flights that I just used. If you are able to pay your credit card balances off every month, then you may likely find ways to get even more credit card benefits than I have been receiving.