Credit cards are a necessary evil. If you use them too much, you get into debt and lose a ton of money to interest. If you don't use them at all, you have no credit history and get penalized when trying to buy a car or house, let alone other things. There is a way, however, to use credit cards wisely to both build credit and actually save additional money. Let’s see how.
In these examples, I will be using three separate credit cards, each for its own purpose. We're going to exclude travel-based cards for now; if you’re all about traveling and earning miles, there are plenty of other cards that focus on that, but we're here to save money while living normally.
Citi Double Cash Card - No annual fee
This card offers 1% cash back when you purchase anything, then another 1% when you pay your bill. That’s a whopping 2% discount on literally everything you can buy with a credit card! Add that to your high-yield index fund and you’ll be growing your net worth like crazy! But we can do better than this with the addition of a second card.
Chase Freedom - No annual fee
While this card only offers 1% cash back on everyday purchases, it has a rotating selection of categories that you get 5% cash back on! This means if you spend $100, you get $5 cash, just like that. Each category lasts for three months, making four different slots per year. Here are the groupings from last year:
- January – March: Gas stations, movie theaters and Starbucks stores
- April – June: Restaurants and Lowe’s home improvement stores
- July – September: Gas stations and Kohl’s
- October – December: Amazon, Zappos and select department stores
Some of these categories aren’t particularly useful, especially if you don’t have a car to frequent gas stations with, but you can still save a lot of money by utilizing these. Especially at Amazon!
Now that we have our 2% cash back from Citi and 5% cash back on categories from Chase, we can get one last card to really reel in these savings.
Blue Cash Preferred Card from American Express - $75 annual fee
This American Express card offers 6% cash back on all groceries year round. The average adult spends $6,000-$9,000 every year on groceries, so you could save up to $540 every single year! There are some downsides, though; there is an annual fee of $75 and it is an American Exress card, so some places may not accept it. But if you spend $1,000 in the first three months you get a $100 credit and a year of Amazon Prime. Also, this means you can walk in to any grocery store and buy any gift card for 5% off. If you know you'll be spending at least $100 on iTunes or Amazon, you might as well get a gift card and get that little discount. It adds up!
So as long as you pay these cards off every month, you could easily save $1,000 every year with modest spending habits. Just don’t let the card convince you to buy more! That would defeat the whole purpose of this technique!
If you haven't already, PUT THE CARDS ON AUTOPAY. You really don't want late fees or interest to pay.
Let me know in the comments if you have any other credit card tricks and techniques for saving money!