Using Credit Card Rewards to Bolster Your Savings
Despite experiencing economic growth and increasingly positive financial situations, only 20% of Americans save money regularly. While a seemingly surprising statistic, the reasons behind it are actually pretty simple. It seems that most households simply don’t understand how to save and lack access to a variety of saving techniques that you’re not taught in school. Adding to your savings account is actually easier than you might think, and it’s especially easy when you know how to make credit cards work in your favor.
The Lowdown on Credit Card Perks
Most credit card companies today offer rewards programs with savings in the form of travel perks, cash back and points earned on everyday purchases. For example, you could potentially save up to $360 a year on a card that pays just 1% in rewards for spending $3,000 each month on bills and expenses, and that’s just on one rewards card. By effectively understanding the perks of each card and strategically spending on each of them, you could use the money you are saving each month to put into a savings account.
Figure Out the Rewards That Fit Your Lifestyle
The key to this strategy is looking for cards that are already optimized to your lifestyle and spending habits. As a good starting point, always look for a rewards card with no annual fees and low interest rates, and opt for a card that has flexibility in allowing you to choose how and where to spend your savings. If you are a family who spends a lot of groceries, for example, you will want to search for a card with perks specifically related to grocery store spending. Other great types of rewards to look for will be gas rewards (for families or individuals that do a lot of driving), hotel rewards, and miles that can be redeemed in the form of airline travel.
Making Sense of Your Savings
So, you’ve got your card and you’re spending while saving. Great! Now, it’s time to make sense of your savings. You will likely benefit from some of the perks that these credit cards offer, and that is a great chunk of savings in its own right. However, to really optimize this financial strategy, you can take it one step further. Begin by sitting down and analyzing how much you are saving, whether on cash back deals or rewards. Analyze your credit card savings each month and make a point to put that amount of cash back into your savings. Not only will you enjoy the perks and savings that credit cards can offer, but you will also be adding to your savings without drawing from your income.
Learning How to Manage Wisely
Overall, the key to optimizing credit card rewards in order to increase your savings lies in learning how to effectively manage your money. There won’t be much point to all the money you will be saving if you don’t know how to put it back into an account that can grow for you over time. When you understand that, you will want to find a card that naturally suits your lifestyle, needs, and spending habits. Always be sure to pay off any small debt accrued and to enjoy your rewards in a timely manner.