Many consumers rely on their credit cards to help them get through a rough patch or to purchase big-ticket items, like a refrigerator or a flat-screen TV. If you’re one of them, here are some credit card hacks to help you save money.
However, when used this way, having a credit card becomes a detriment that can wreak havoc with your budget. It doesn’t have to be this way if you’re savvy about your credit card usage. In fact, with just a slight shift in mindset and a few small changes in your habits, your credit card can save you money even while you spend money. You just need to know how to take advantage of what your credit cards offer.
The following seven hacks teach you how to save money each time you swipe your card. These tips will make you more conscious of where you’re spending your money. They also alert you to some credit card programs that you may not know about or that you are at least not taking full advantage of.
1. Rewards Points and Cash Back
Some credit card offers include reward points. Here’s how this works, according to The Ascent website. A credit card that comes with reward points gives you points back on the purchases you make. Once you accrue a certain number of points, the card company gives you cashback.
Saving money is effortless for a couple of reasons. First, the credit card company keeps track of your purchases and your cashback rewards. The card company doesn’t require you to keep track of your savings. It happens automatically. Second, if you save the money you get back instead of spending it, the saving feels pretty effortless. You didn’t have to write down your purchases in a little spending notebook. You just got the money when the credit card company released it to you.
2. Bolstering Your Credit Score
Here’s something to keep in mind, according to Acorns. Credit cards that you pay off in a timely fashion each month help you to build your credit score. The higher your credit score, the better interest rates you’ll get and not just on credit cards. When it comes time to buy a home or a new car, these lowered interest rates save you some serious cash over time.
For example, let’s say your credit score runs in the high 750s. With this score, you qualify for a 30-year fixed-rate loan with a 3.6% interest rate. You take out a loan for $216,000 to pay for your new home. Over the 30 years that you pay on the mortgage, you’ll pay about $135,000 in interest.
However, if your score bumps up to 760 or higher, you could have a 3.24% interest rate instead of a 3.6% interest rate on the same amount ($216,000). You’ll save yourself at least $10,000 over the life of the loan by doing this. Your interest payments come to $125,000 over the same 30-year period with the lowered interest rate.
According to a CNBC article, using a credit card for all your purchases may actually save you money in the long run. Here’s how. Before you embark on your money-saving journey, take a look at your credit card statements.
Notice where you spend money. Do you stop for coffee every day on your way to work? Did you go to the movies a couple of times last month? How about clothing? Did you buy lots of clothes each month and at the change of the season? Those purchases add up.
However, it is difficult to ignore how much you’re spending on frivolous items when the information is printed on your credit card statement in black and white. Nowadays, most people access their statements online. This means your credit card balance is available 24/7.
It encourages you to save money because it reminds you of how much you’ve spent, provided that you check your balance regularly. Some financial experts even recommend checking your card balances daily to stay on top of them.
4. Extended Warranty Costs
Some cards have rewards programs that allow you to extend the warranties on your major purchases. Usually, these cards double the warranty offered by the manufacturer, giving you about one extra year of coverage.
Extending warranties could help you save on repairs or even replacement costs.
5. Balance Transfers
As your credit improves, you’ll qualify for cards with better interest rates. Some of these cards give you a zero percent introductory rate in addition to the lowered interest rate (once it kicks in). The Dough Roller advises borrowers like you to sign up for one of these cards and to transfer the balances from your high-interest card to the zero-interest card. This saves you thousands (potentially) because you’re not paying those high-interest rates anymore.
6. Travel Rewards
Credit cards with travel rewards save frequent travelers money on travel costs, like plane tickets, rental cars, and hotel rooms. Sometimes, these rewards also include travel insurance and free checked bags rewards, depending on the card.
If you travel a lot, you’ll want to plug into this reward. It saves you money and some guilt because travel perks come with the card.
7. Pay Off Your Balance Each Month
Most credit card companies won’t charge you any interest if you pay your balance in full each month. To make this work, treat your credit card like it’s a debit card. Put money aside for each purchase that you pay for with your card. Once the bill comes due, pay it off. If you adhere to this plan, you won’t have to think about saving money for your card’s interest rate. It also helps you develop healthier accounting and spending practices, which benefit you in the long run.
Having a credit card can help you in so many ways, particularly if you find yourself in a bind. However, cards offer you so many more advantages than just getting you out of hot water. They also include money-saving perks. The savviest credit card users understand that their cards are a financial instrument that they can use to build wealth and not just pay for purchases.
Benefits, like travel miles, better interest rates, in the long run, extended warranties, and greater personal accountability, are built-in perks to owning a credit card. Additionally, because you can check your card balance online, you’re more likely to watch how you spend money.
In essence, your online credit card statement becomes your accountability partner. This allows you to better adhere to your budget, which also saves you big bucks over time. That said, many of the money-saving rewards that come from credit cards, like cashback programs, don’t require you to think at all. They save you money automatically, making responsible credit card usage an excellent way to bolster your budget in the long run.