Free money, you say? Yes, please; I’ll take that. That’s what it seems like when a cash back credit card offer pops up, but it’s not always something that works the way you think that it might. The biggest complaint we hear about cash back credit cards is that people don’t actually earn cash back. It’s not because they don’t pay; it’s because you’re not using them the right way.
Friends of ours have a business that requires they purchase a lot of supplies throughout the year. They use their business credit card that works well with the type of purchases they make throughout the year, and they end up with thousands back every year. The wife uses it for her Christmas shopping and cashes it in as a statement credit every year.
They use the card the right way, and that’s what makes it easy for them to earn significant cash back. If you are sitting here wondering how it is people think that a whopping $3 cash back every year is worth the price of a card, you’re not doing it right. Our pretty amazing tips are going to make it easy for you to earn cash back throughout the year without really doing much more than you already do. It’s just about taking what you do now and doing it better.
The first thing you have to do is stop carrying a balance. You cannot earn cash back with a credit card if you have a balance on it. You have to be able to spend each month to earn cash back. If a large portion of your card is used up with your balance, you’re not spending money and earning cash back. Furthermore, any cash back you might have earned spending money on the card is negated by the fact that now you’re paying interest.
Cash back on travel? If you are on a plane, in a rental car or in a hotel every week or a few times a month at least, you’re going to earn some serious cash back this way. Cash back on travel when you stay home and take one vacation every year? That’s not going to earn you cash back enough to even cover the kind of annual fee we know you are probably paying.
On that note, some people find that cards with revolving categories for additional cash back are great for them. A card that offers you a chance to earn 5% cash back for three months on groceries or gas or department stores works for some people.
If you’re not someone who can spend that kind of money in those kind of places on a regular basis, a card that offers a flat rate might be a bit wiser for you. Just make sure the card you pick works hand-in-hand with the kind of spending you are accustomed to.
Now, we are not promoting debt; we really aren’t. However, no one is making money with a cash back card unless they are actually spending money. To do this, you don’t want to go out and purchase arbitrary items you don’t actually need. You want to go out and you want to spend money on things you do need. Even if you don’t have a lot of disposable income, you can still earn a pretty penny in cash back.
How? Use your credit card to pay for things that you pay for every month. Use your credit card to pay for your mortgage. Use your card to pay your utilities and buy your groceries. Instead of writing checks and using your debit card, put everything you normally spend on your credit card every month and then write one check at the end of the month to pay off the balance on your card. That’s how you earn cash back.
One of the mistakes that people often make is forgetting to actually redeem their cash back offers. Like points and credit cards, no one is just sending you a check for all the cash back you earned throughout the year. Your credit card company wants you to fill out the online form asking for that cash back.
Forgetting to do that every so often can actually result in you losing your cash back privileges. One thing we usually recommend is that you do what our friends do; pick a certain time of year and delegate your cash back to that. For instance, cash it in during the holidays so you can do your Christmas shopping. You can also plan a vacation every year and cash in those points that time of year so you can use your cash back savings to finance your hotel or your flight or whatever you choose to book.