How do I leverage my credit to get money back?
Article brought to you by Ollo and authored by Shannon McLay, Personal Finance Expert and Published Author.
There are various types of credit cards available to users. The most common type is an unsecured credit card where the lender offers you a credit limit and charges you fees or interest depending on your balances and repayment plan. If you have established enough positive credit history, you could have access to rewards cards. A rewards card offers you something in return for the spending you naturally have on the card, and the most common type of rewards card is the cash back rewards card.
With a cash back card, as you spend money, your card provider will offer you a percentage back of how much you spend in the form of statement credit, check or gift certificates. For example, if you have a 1% cash back rewards card and you spend $1,000, you are entitled to get back $10 from your credit card company.
This may not seem like a lot of money; however, some cards will give you incentives or higher percentages back on certain categories like groceries or gas so you can get back 1% on most categories but 2% on other categories. Over the course of a year, this adds up and works in your favor. At the very least, you are getting money back for spending money you were planning to spend to begin with.
If you’re going to employ this strategy and utilize credit card spending to earn rewards, it’s important to remember to only spend money on the credit card that you were planning to spend and not spend extra money just to get cash back rewards. You’re not getting money back at a dollar for dollar rate, and you wouldn’t want to lose money while trying to make money. That’s just not a smart investment strategy.
You should also be aware of the fees that the cards may have. Frequently rewards cards charge users an annual fee to use the card; however, if you are barely getting enough cash back to cover the annual fee on the card, the rewards card probably isn’t worth it.
It’s also important to note that these types of rewards cards are typically more readily available to users with good to excellent credit scores. If your credit score isn’t as high as you would like, perhaps access to a rewards card is good motivation to start fixing some of your credit issues.
This article is provided to you solely for education purposes. It is not intended to provide you with any specific legal, investment or financial advice and you should not solely rely upon this in making financial decisions.