Boost Your Budget With Credit Cards
|December 14, 2012||Posted by derek under Budgeting|
Yes, you read that right — you can boost your budget with credit cards!
And no, we haven’t had too much eggnog to drink this holiday season!
The common mentality is that credit cards are evil, or at least a significant contributing factor to why so many people are mired in debt. However, with the proper foundation of personal finance knowledge, and discipline, credit cards can boost your bottom line.
Show me the money!
So how exactly do you go about boosting your budget with credit cards? Plain and simple – rewards cards. There seem to be more varieties than flavors of ice cream at Baskin Robbins these days, but with the proper research you can find attractive rewards cards.
Think about how many monthly bills you have setup to automatically deduct from your checking account. Or if you’re anything like my relatives, bills that you still pay with a written check.
Rather than writing checks or having those bills auto-debited from your checking account, have them setup to automatically charge your rewards card every month. While this tactic might not be recommended for everyone — be honest with yourself if you have the discipline for this — but these are bills that you have to pay regardless, right?
Why not earn a reward for paying the bills you already pay every month? As an added bonus, you will simplify your bill paying as well. With everything being charged to your credit card on auto-pilot, you only need to worry about paying your credit card bill.
Use only if…
As we mentioned, this approach is not for everyone. If you’re worried that you won’t be able to pay the credit card bill in full, or if you will be tempted to overspend on other items because your money is available until the bill is due, this probably isn’t for you.
Using your rewards card to boost your budget might be right for you if:
You have the money to pay the credit card bill in full.
If you are carrying a balance, you will eliminate the benefit of the rewards by paying interest on your monthly expenses.
You pay your credit card on time.
Again, if you have a history of missing your due date, you will be hit with late payment fees and reduce the value of any rewards you are earning.
You avoid frivolous spending.
The strategy here is to earn rewards on your necessities that you are paying for right now; i.e. gas, electric, cable (not a necessity) and not a new pair of shoes.
For those that have a track record of sticking to their budget and being disciplined with their spending, this strategy can be a nice little boost.
Over the course of the year, you will build up a healthy balance of points / miles / rewards and can cash them in for something nice. Depending on your current budget, you may see a boost of anywhere from $500-1000 in rewards. Possibly higher too.
It is a beautiful thing to be rewarded for spending money that you need to spend every month, isn’t it?
Spread it out for the best rewards
With the variety of rewards cards available, you can also spread your spending around to maximize your rewards.
For instance, some credit cards have a higher reward for certain types of charges. You may have one card that pays a higher reward for gasoline purchases, so use that card for each and every stop at the gas station. That same card might not have as nice a reward for grocery stores, so find a card that has the best rewards for groceries.
By mixing and matching, you will further boost your annual rewards!