Andres Rueda/Flickr
One reader responded to my credit card moratorium with a detailed blog post about the cash back rewards I am giving up. The info was so useful I wanted to share it. Here is Marie’s post:
“Different strokes for different folks,” goes the saying. And that applies most definitely to credit cards! Now, I can see the benefits of trying to rein in one’s spending by using cash only for discretionary purchases. If you leave your credit and debit cards at home and have only your available cash to use, you are obliged to be cautious about your spending.
But, when used for larger payments, credit cards that offer 1% to 5% cash back can be very rewarding. Here are some approximate bills you probably pay and how much you can earn with a 1% cash back credit card:
- DMV ($2.50 rewards for $250 DMV payments)
- Car Insurance ($10 rewards for $1000 payments)
- Home Insurance ($15 rewards for $1500 payments)
- Home Earthquake or Flood Insurance ($15 rewards for $1500 payments)
- Renters insurance ($2.50 for $250 payments)
- Car dealer down payment ($50 rewards for $5000 down payment)
NOTE: All these benefits can be nullified if you pay high interest rates. So use your Rewards card wisely. Make sure you budget to pay in full (or installments), just as you would do if sending the payment by check.
You can also earn cash back rewards on many regular monthly payments:
- Time Warner Cable fees (at $60/month payment, cash back of $7.20/year)
- Direct TV fees (at $60/month payment, cash back of $7.20/year)
- Cell phone bills (at $50/month, cash back of $6/year)
Some credit cards offer special quarterly 5% cash back offers for purchases made at specific types of stores, like grocery stores, drug stores, department stores, home improvement stores, and clothing stores. Three sites I like for these types of credit cards are CapitalOne, ChaseFreedom or Discover.com. Spend $200-$400 per quarter on these special offers and the 5% cash back rewards will earn you $40-$80. You can also search for Visa and Mastercard reward cards at CardRatings.com.
April 6th, 2010 at 12:32 pm
I have said in the past that credit cards, when used correctly and responsibility, is a much better way to pay for goods and services than cash. The key is that you must pay your balance in full each month and ontime. Treat your credit account as an extension of cash rather than a credit account. I charge practically everything except for a few places that only accepts cash. It doesn’t matter if the charge is $.03 or thousands of dollars. It all gets tallied up into a single bill which I pay online to get an instant payment confirmation number, saves on a $.44 stamp and takes away the worries of it getting lost in the mail or being processed late. I have been reaping the cash back rewards for nearly 15 years.
April 6th, 2010 at 12:43 pm
We could not agree more. We pay off our cards each month and enjoy two benefits. (1) Rebates. (2) Tracking a majority of our expenses, since we spend very little in cash.
April 6th, 2010 at 1:17 pm
Can’t help but agree, too. As long as you pay that cc statement off each month, why not get points (cash) for using the card to pay bills. It’s not as if it’s impulse spending when you pay your homeowner’s, auto, eq insurance, etc. I’ve been doing this for years and cannot understand why others don’t take advantage of getting cash back for paying their bills rather than vice versa
So, leave your card at home if you like, but use it instead of writing out a number of checks. I just call my insurance agent, give her the cc # and voila … the premium is paid, I’ve saved a stamp, and I’ve gotten points.
April 6th, 2010 at 2:14 pm
Careful–Boyfriend has done a lot of research on cash back vs. “miles” cards, and discovered that you are actually supposed to pay taxes on cash back. He has decided miles cards are more worth it–and cards like Amex, where you can turn your miles into whatever you want (as opposed to being tied to one airline, hotel, etc.) are really the best deal!
April 6th, 2010 at 3:13 pm
You are not a babe. You are very very Ugly. I would rather spend my money and grow broke then listen to a troll.
April 6th, 2010 at 4:45 pm
Let me just guess, Steve has never been seriously broke.
April 6th, 2010 at 5:13 pm
I love the idea of earning rewards with my credit cards. As long as you are committed to paying them off each month, you really can’t go wrong.
April 6th, 2010 at 6:47 pm
I agree 100%. If you can spend responsibly, you should definitely go with credit cards that pay rewards.
However, 1% is pretty weak. Most rewards cards pay 1%, so you can get this anywhere. If you’re going to play the credit card game, do it right.
Get a card like the GM or Subaru card that pay you 3% on your car’s down payment. Or a card that pays 5% on gas, groceries, or drugstores. Or better yet, a card that pays you 2% cash on absolutely everything.
Otherwise it’s simply not worth the hassle.
April 7th, 2010 at 1:42 am
Steve is very mean spirited. I’m not so sure you were raised well. Your writing begs to differ.
April 7th, 2010 at 2:15 am
[...] Bargain Babe » Forget cash only, make money with credit cards [...]
April 7th, 2010 at 2:40 am
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April 9th, 2010 at 6:04 am
Hiya. found this through google. just wanted to let you know that part. but um, thanks for the article. It’s good to know.
April 10th, 2010 at 11:34 am
Thanks for the info. ShoeMoneyX rules!
April 24th, 2010 at 1:59 pm
At long last! I’ve been seeking information on lego for a time and found it, my son will undoubtedly be ecstatic!