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How to Use Cash-Back Rewards and Points to Save Money

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How to Use Cash-Back Rewards and Points to Save Money

July 2, 2020

Let’s be honest, who doesn’t want to save money? While budgeting and cutting unnecessary expenses are crucial, there’s a surprisingly effective and often overlooked way to boost your savings: leveraging cash-back rewards and points. With a little bit of strategy, you can turn your regular spending into a surprisingly lucrative way to save.

Understanding the Landscape

There are several ways to earn rewards, each with its own pros and cons. Here's a breakdown:

  • Credit Card Rewards: This is the most common method. Many credit cards offer points, miles, or cash back on purchases.

    • Flat-Rate Cash Back Cards: These cards offer a percentage back on all purchases (e.g., 1.5% or 2% cash back). These are great for everyday spending.
    • Category Rewards Cards: These cards offer higher cash back percentages on specific categories like groceries, gas, dining, or travel.
    • Sign-Up Bonuses: Many cards offer substantial bonus rewards for spending a certain amount within the first few months.

  • Loyalty Programs: Retailers like supermarkets, drugstores, and department stores offer loyalty programs that reward you for frequent purchases. These often include points, discounts, and exclusive offers.

  • Travel Rewards Programs: Airlines and hotels have their own reward systems, often earning miles or points that can be redeemed for flights, hotel stays, and other travel expenses.

  • Other Points Programs: Some companies offer points through their services or apps. For example, some streaming services or mobile apps reward you for using them.

Strategies for Maximizing Your Rewards

Now that you know the options, here’s how to make the most of them:

  1. Choose the Right Card (or Cards): Don’t just pick the card with the biggest sign-up bonus. Consider where you spend the most money. If you frequently buy groceries, a card with high grocery rewards will be more beneficial than a card with a generic flat rate.

  2. Maximize Category Rewards: Use your category rewards card for purchases within those designated categories. This is where you'll see the biggest returns.

  3. Don't Be Afraid to Transfer Points: Some rewards programs (like airline miles) allow you to transfer points to partner programs. Sometimes you can get better value transferring points rather than redeeming them directly.

  4. Redeem Rewards Strategically: Don't let your rewards sit unused. Redeem them for things you actually need or want – gift cards, travel, or even just cash back.

  5. Track Your Spending: Use a budgeting app or spreadsheet to track your purchases and identify which rewards programs you’re most frequently utilizing. This will help you understand where your money is going and ensure you’re earning rewards on everything you spend.

  6. Read the Fine Print: Always understand the terms and conditions of your rewards program. Pay attention to expiration dates, redemption rates, and any fees.

Resources to Explore:

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