Well, it seems obvious, but I know so many people who haven’t learned this yet. I add about $50 a month to our budget by using a cash back credit card for our bills and expenses. I still track my budget as normal as if I had paid with a debit card. When the due date comes, I pay the statement balance in full. (I always pay around the due date, never really early, because I’d prefer to leave the cash in my checking account to earn a few extra days of interest.)
By paying the statement balance in full, I never pay any interest, but I earn 1.5% cash back on all my purchases. According to YNAB, I’ve redeemed $296 in rewards from October through March. This is all extra money I can use to save toward our extra goals.
Here are a few things I would look for if you’re looking for a good cash back credit card:
- What is the cash back rate? There are so many cards with 1.5% cash back or even 2% cash back, don’t settle for a 1% card. Navy Federal and USAA both offer 1.5% cash back cards, and since this blog is for military families, I’m venturing to guess most military families have an account with one or the other. If your credit card is with your primary financial institution, you will see the transactions a lot more often and be more cognizant of your spending to stay on budget.
If the cash back rate varies, such as more cash back at restaurants or certain stores, don’t overspend just to earn more rewards. I know that is obvious, but it can still trick your brain sometimes. - Are there any signup bonuses? Anytime you’re looking to sign up for a credit card, see if there are bonuses available for signing up. Great bonuses will be worth upwards of $500, but they may be on cards that have annual fees. Also, if the signup bonus requires you to spend $5000 in 3 months, but your monthly spending is $1000, don’t go into debt for rewards. Find a bonus you can meet with your regular spending.
- Are there extra perks with this card? Many cards are Visa Signature, which offer concierge perks and other benefits (that I’ve never used, to be honest). Some credit card companies will extend manufacturer’s warranties for a year on electronics and other purchases. This American Express card offers a lot of extra benefits for cash back, but different tiers for rewards. As a military family, you may also want to look for a card that has no foreign transaction fees, as many deployments and duty stations can be overseas.
- How are rewards issued? My card issues my cash back into my checking account, so I can spend it or save it as I see fit. Of course, if your card issues your rewards as a statement credit, you can re-allocate those dollars you were going to pay it off with to do other things, but I like having the cash immediately.
- Is there a minimum to redeem cash back? Does it expire? These are simple questions, but you want to make sure that if you’re not a huge spender, you’re not waiting months until you reach the $50 minimum in rewards. If you are letting your cash back accumulate for a big purchase, make sure it doesn’t expire.
- Are there annual fees? Many cards will offer excellent rewards, but have an annual fee of $100 or more. Make sure your regular spending is going to generate enough more in rewards to justify that annual fee, or see if it can be waived. There are many blogs and posts that state American Express waives all annual fees for Active Duty military, but I can’t find anything official from American Express.
Of course, there are other types of cards, such as travel or points that you can redeem for other things, but my cash-back card will always be my go-to. And as a note, you will notice that nowhere in here did I mention the interest rate as a factor of what card to get. It shouldn’t matter; if you are paying your statement balance in full every single month as you should, the interest rate is irrelevant. The interest rate on my credit card is actually really high because I had pretty shaky credit when I got approved for it, but I have never paid any interest on it, and I actually don’t even know the actual rate off hand. Focus on what the card offers in benefits and don’t worry about the interest rate. Cards with the best benefits will have higher APRs, but it shouldn’t matter to you at all.
There are a lot of blogs that are specifically focused on credit cards and rewards offerings, such as Doctor of Credit, but I am not one of them. I have had the same credit card for 3 years and applied for one other card for a bonus reward (which had a $5000 minimum spend in 90 days; that was stressful). I am not chasing credit card bonuses, and if I had more time on my hands, I would consider it because it can be lucrative.
I’m just trying to give a real picture of how living a very normal life with a cash back credit card instead of a debit card will give you some extra bucks in your pocket. It takes me no more work to use a credit card versus a debit card, and I actually feel better about it, knowing if it gets compromised, the cash in my checking account is not jeopardized. As long as you know you can stay within budget on a credit card and not spend more than you have, this can be a great way to bolster your savings.
