Over the years, I’ve had credit cards that have rewarded me with stuff like airline miles, hotel points and even National Football League clothing. Yet, because I don’t travel that much and I don’t need another Pittsburgh Steelers fleece, those rewards have largely gone to waste. In fact, by some estimates, Americans waste billions of dollars in such rewards each year.
I now only own cards that offer the one thing I’ll never forget to use – cash. With a few, simple techniques, I’ve found that I can turn credit card cash back into a useful source of “income.” In fact, I earn or save enough to treat my family to a nice dinner out each month. Here’s how:
Shop for the Best Card
At the bare minimum, your cash back credit card should be paying you at least 1 percent cash back with no annual fees and no annual cash back limits. Sites like www.creditcards.com and www.nerdwallet.com can help you find the best deals out there.
Go with the Float
I try to make big purchases with my credit card a day or two after my monthly bill comes out. Why? I won’t have to pay that bill for nearly two months. (One month until the next bill arrives, plus the one-month grace period to pay.) Meanwhile, I keep that money in an interest-earning savings account.
Pay for Everything with Plastic
I put every monthly bill I can on my credit card – many through automatic payment plans. That includes everything from phone and cable bills to newspaper subscriptions and my daughter’s piano lessons. This is stuff you’re buying anyway, why not get cash back and save money on stamps by paying a single bill?
Cut Your Taxes
I deposit some of my cash back into an individual retirement account (IRA). IRA contributions are tax deductible, so that cash back reduces my federal income taxes. Some cards, like the Fidelity® Investment Rewards® American Express® Card, allow you to do this automatically.
By paying for most things with plastic, I benefit from my cards’ built-in fraud protection. I once had my credit card stolen, and it was used to sign up for an online dating service. My credit card company quickly noticed the unusual charge, contacted me and removed it from my bill. Had someone stolen my cash or debit card, I would have had to fight to get that money back. Now that’s priceless.