Cash back credit cards happen to be a really great way to earn money while you spend. It is true. Okay… I see those wheels turning. Before we get too carried away with the idea here, let us make sure we are on the same page; I am talking about making purchases you would normally be making anyway, not going nuts and initiating a shopping spree just to earn that percentage back. That would not really save you any money at all, would it?
Here is the idea: Instead of making purchases with regular credit cards, consider applying for cash back credit cards -- because they not only pay you a little kick-back with every purchase you make, they can offer you the opportunity to build savings in ways you might not have thought of.
Cash Back Credit Cards
Often times, credit card companies will supply consumers such as you with approximately 5% cash back on select purchases most commonly, those made at drug stores, supermarkets, and gas stations. In addition, a lot of issuers will give 1% cash back on all other purchases. Spend $2,000 dollars on a vacation and you have just “made” $20. Not bad, right? Needless to say, if you use your credit card frequently, this will add up in a flash. Your accumulated savings can be used for whatever you want, but you can really start putting something away or paying down debt if you stay strict with yourself.
One Benefit of Cash Back Credit Cards - Annual Savings
Let us talk numbers here. Say you spend $1000 at supermarkets, $200 at drug stores and $300 dollars on gas, and all this takes place over the course of exactly three months. That adds up to $1500 total. Now consider the fact that 5% of figure results in $75 back -- on things you were going to buy anyway! Projecting those savings over a year's time, that would be $6,000 spent for the year, which gets you a respectable $300 back without having to keep anything in a savings account or tied up in investments. That $300 could buy you…well, three months worth of gas, for example!
What else can these savings do for you? They can do a ton, to tell you the truth. Since you are saving between 1 and 5 percent on every purchase you make with your cash-back card, it is essential that you pay attention to how you manage what is coming in. With the hypothetical $300 you have saved, you can pay down debt or -- if you do not carry a balance on your credit cards and have no loans -- consider investing your return in your retirement plan and watch it grow into something substantial. It is important to keep in mind that if you do carry a balance on your card, the interest being charged is going to chip away mightily at anything you have earned from your newfound strategy; to take full advantage of your new credit card, it is mandatory to make sure you pay off your balance each month. Or at least do not let things get out of hand. That would defeat the whole purpose, right?
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Josh Michaels is a freelance writer who survives on very little income and carefully considered financial decisions. This combination has allowed him to have fun, travel the world, and start a retirement account – all without the pleasure of holding a full-time job.
