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.