Why you should purchase all the pieces with a bank card
Having multiple credit cards and playing the rewards game can save you hundreds of dollars every year – if you use the cards wisely.
“The big fork in the road is whether or not you have a balance,” said Ted Rossman, senior analyst at Bankrate.com and Creditcards.com. “I think you should use your credit card for everything because the rewards are great. They can really add up over time. You get better buyer protection, better protection against fraud.
“The only major downside to credit cards is the high interest rates,” he added. “But if you’re paying in full and avoiding those, then yes, credit cards are great.”
Chasing rewards can land you some sizeable sign-up bonuses, like the 75,000 miles Capital One Venture Rewards credit card or the $900 cashback from Chase Ink Business Unlimited.
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Those who use credit cards responsibly and don’t keep a balance typically save $300 to $400 a year. Rossman earned $1,701 in credit card rewards in 2022. But getting the most out of your credit cards comes down to your spending habits — and finding the perks that would save you the most money.
“If your family spends heavily on groceries, get a card that gives 5% or 6% cash back on groceries,” Rossman said. “This is a really nice inflation breaker.
“Maybe consider a second card, which is just a solid flat rate, something like 2% cashback on everything,” he added.
The rewards that draw the most attention are often travel-related, he said: perks like free or discounted flights, hotels, rental cars, access to airport lounges, priority passes, and TSA PreCheck, Global Entry or Clear. Redeeming rewards for merchandise, on the other hand, probably won’t get you the most bang for your buck.
Don’t chase rewards when you have a credit card balance
More than 80% of Americans have at least one credit card.
Anh Tran, a certified financial planner and managing partner at SageMint Wealth in Irvine, Calif., recommends having two credit cards, or three if you’re a business owner: one for basic expenses, a second for backup, and a third to run the business expenses separately.
But unless you’re someone who can settle your balance before it’s due, she doesn’t recommend a credit card at all.
“Paying 20% interest on an accumulated balance and then still paying interest, that’s a really big hole that you keep digging and it’s going to be really difficult to get out of. You’re not paying your credit card balance,” Tran said.
Americans own four cards on average, but not being able to pay off the full balance each month can hurt your credit score and your wallet.
According to the Federal Reserve Bank of New York, Americans’ collective credit card balances reached $986 billion in the last quarter of 2022. Those contributing to this debt should not use credit cards because the interest rates they pay outweigh any card rewards.
How much money you save with credit cards depends on your lifestyle and how you play the game. Of course, this assumes that you handle it responsibly.
Regard the video above to learn more.
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