Credit Cards….. one of the tools of the personal finance trade.
Used improperly, it can put a person into poverty from all the debt accumulated and ruin credit scores.
Used correctly, it can actually speed up the journey to financial freedom.
How?
Simple. Credit cards are a tool, just a tool. Like using a pipe wrench for a job that requires a screwdriver, improper use of credit cards can be damaging to a person’s finances.
Used properly, credit cards can build up credit scores, earn cash back, earn rewards and efficiently pay down debt.
Why Credit Cards Important
As much as I preached in a previous article that cash is king, the sad reality is that we need credit cards throughout our daily lives. Don’t believe me? Try to rent a car or a hotel without a credit card.
The reason for this is that credit cards are good for businesses. They get their payment instantly with a high degree of fraud protection. Businesses do not have to worry about doing background checks from customers. It is already done for them!
Another reality is that we live in a credit society. A person’s credit score dictates the ability to qualify for a car loan, a mortgage, or any other loan for that matter. Plus, a person’s credit score also impacts the interest rate available on loans. Have a 750+ score? Odds on, you’ll get the mortgage at a great rate. Doesn’t necessarily matter if you are $60,000 in personal debt, you just scored the mortgage to your dream home! 😊
Good credit card management is a major enabler to an outstanding credit score. Learning how to manage credit cards can be the difference between qualifying for a loan or not. I don’t make the rules of the financial game, I’m just telling how to play it! lol 😊
Look, I’m still a big proponent of living on a cash budget. The reality is that there will be times where a credit card will have to be used. If we must use credit cards, let’s learn how to use credit cards to our advantage.
How 0% APR Credit Cards Can Save You Money
First off, let’s talk about how credit cards can save money in the long run. Yes, this sounds counter-intuitive but work with me on this.
As we all know, credit cards are notorious for having extremely high interest rates (some as high as 24%…. ouch!). However, if used properly, the damage caused by the high interest rate can be minimized.
For example, a lot of credit cards offer 0% introductory annual percentage rate (APR) to entice your business. This offer typically lasts anywhere from 12-24 months then the listed interest rate takes over.
A good strategy to use is to roll the credit card debt onto a card with an introductory 0%. Then make interest-free payments for as long as the term is in effect. When the introductory period expires, find another card with a 0% APR and repeat the process.
The good news is that this strategy will payoff the debt much faster than sticking to 1 credit card. In fact, it could speed up debt payoff by months, maybe years!
The downside is that hopping from 1 credit card to another could impact your credit score. Make sure to look at the big picture and accept the possible consequences before deciding on this strategy.
Also make sure the credit card being moved to also has a low interest rate after the introductory period expires. In case you decide to keep the credit card, keep the rate as low as possible to speed up debt payoff.
0% Introductory APR Credit Cards
I did some research and found the 5 best credit cards with both 0% Introductory APR’s and relatively low interest rates.
Citi Diamond Preferred Credit Card
0% Introductory APR for 18 months on purchases and balance transfers. After the introductory period expires, the APR will adjust to 14.74% – 24.74% depending upon credit worthiness.
There is no annual fee.
NOTE: There is a balance transfer fee of $5 or 3% of the amount of each transfer, whichever is greater.
Bank of America Credit Card
0% Introductory APR for 18 months on purchases and for any balance transfers made in the 1st 60 days. After the introductory period expires, the APR will adjust to 12.99 – 22.99% depending upon credit worthiness.
There is no annual fee and no penalty APR which means that paying late won’t automatically raise the APR.
NOTE: There is a balance transfer fee of $10 or 3% of the amount of each transfer, whichever is greater.
Citi Double Cash Card
0% Introductory APR for 18 months on purchases and for any balance transfers made in the 1st 4 months. After the introductory period expires, the APR will adjust to 13.99 – 23.99% depending upon credit worthiness.
There is no annual fee.
NOTE: There is a balance transfer fee of $5 or 3% of the amount of each transfer, whichever is greater.
Bonus: This card also has cashback rewards. You earn 1% cashback on unlimited purchases. Plus, you earn an additional 1% cash back as minimum payments are made on the purchase
Wells Fargo Platinum Card
0% Introductory APR for 18 months on purchases and balance transfer. After the introductory period expires, the APR will adjust to 16.49 – 24.49% depending upon credit worthiness.
There is no annual fee.
Bank of America Customized Cash Rewards Credit Card
0% Introductory APR for 15 months on purchases and for any balance transfers made in the 1st 60 days. After the introductory period expires, the APR will adjust to 13.99 – 23.99% depending upon credit worthiness.
There is no annual fee.
NOTE: There is a balance transfer fee of $10 or 3% of the amount of each transfer, whichever is greater.
Bonus: This card also has cashback rewards. You earn 3% cashback on the category of your choice, 2% cashback at grocery stores and wholesale clubs, and 1% cashback on all other unlimited purchases.
How Cashback Rewards Credit Cards Can Save You Money
Aaahhhh! Cash back! Just the sound of the words, “cash back”, instantly brightens my mood! Lol 😊
Cash back is just that. You get a percentage of cash back from the purchases being made. For example, Let’s say I bought $500 of concert tickets for my group. I use my credit card which offers 5% cashback on purchases. My account is credited with $25 in free money!
Usually people setup a cash back limit (say $200) so that the credit card company will automatically mail a check or deposit money into your account. You can use this free money to help pay off debt faster.
Compound this with a credit card offering introductory 0% APR on new purchases and it is a no-brainer!
Best Cashback Credit Cards
Here are the 5 best cashback credit cards I could find:
Capital One Savor Card
Here are some great cashback rewards! You earn 4% cashback on dining, entertainment, and streaming services, 3% cashback on groceries, and 1% cashback on all other purchases.
The APR is from 15.99 – 24.99% depending upon credit worthiness.
There is a $95 annual fee. If used frequently, this card will pay for the fee and then some!
Capital One Quicksilver Cash Rewards Credit Card
Here is another good one! You earn 1.5% cashback on ALL purchases. Doesn’t matter if it is dining, traveling, flying, gas, groceries, or concert tickets. If you can buy it, this card will give you 1.5% cashback! Also, cashbacks do not expire for the life of the account. Can be redeemed anytime.
Plus once $500 is spent within the 1st 3 months of the account opening, Capital One pays you a $200 bonus!
This card has a 0% introductory APR on all purchases for the 1st 15 months of holding this card. Afterwards, the APR is from 15.49 – 25.49% depending upon credit worthiness.
There is a $0 annual fee!
Discover it Cash Back
Check this out! You earn 5% cashback on ALL purchases for a pre-selected category. This category rotates every quarter. Examples include Amazon, grocery stores, gas stations, etc. All other purchases earn 1% cash back. Also, cashbacks do not expire for the life of the account. Can be redeemed anytime.
The APR is from 11.99 – 22.99% depending upon credit worthiness. This is a REALLY good rate especially for a cashback credit card!
There is a $0 annual fee!
On top of that, for the 1st year of holding this card, Discover will automatically match all cash back earned. This includes no minimum spending and no cap on the amount of awards allowed.
It Pays to Discover! Lol 😊
Chase Freedom Unlimited
Another doozy! 1st off, once $500 is spent within the 1st 3 months of the account opening, Chase pays you a $200 bonus!
You earn 5% cashback on travel purchased using the Chase card, 3% cashback on dining and drugstores, and 1.5% unlimited cashback on all other purchases.
This could be huge! For example, my insurance has a clause that states I must pay for the 1st $7,000 of all expenses out of pocket (OOP). Once this kicks in, I pay nada, nothing for the rest of the year. Our kids’ medical bills used to be so high we would cover this by Valentine’s Day. Now use this card to pay the $7,000 OOP and we get $350 cash back. Then to pay the card off, I use my HSA card to pay the balance. Nice!
Plus, earn 5% cashback on grocery store purchases up to $12,000 spent in the 1st year.
Rewards do not expire for the life of the card.
On top of all that, this card also has a 0% Introductory APR for 15 months on all purchases. Afterwards, the APR is from 14.99 – 23.74% depending upon credit worthiness and there is a $0 annual fee.
Fidelity Rewards Visa Signature Card
This is my “Go To” card!
You earn 2% unlimited purchases…. All the time, no matter what. Every purchase made no matter how big or how small earns 2% cashback! No caps, no expirations, no restrictions, and no exceptions. It’s that simple!
The APR is 13.99 – 23.99% depending upon credit worthiness.
What’s different about this card is that the cash back rewards are fed into either a Fidelity savings or Fidelity brokerage account. From there, a person can invest the money directly into the market or transfer it to a personal savings / checking account.
There is a $0 annual fee.
Definitely a card to check out………….
What To Do Next?
So there you have it. 10 great examples of ways to save money while using credit cards. While I still believe that cash is always king, in today’s society it’s virtually impossible to not use a credit card. If you need to use them then take advantage of all the ways a person can save money…. You’ll be glad you did!
Live the Life You Love, Want, and Deserve! 😊