When you’re thinking about putting something on your credit card to collect rewards points — whether it’s a round of drinks, a set of tires or a week’s worth of groceries — ask yourself: Is this money I’m going to spend anyway?
If so, then go ahead and put it on the card.
If not, then hold up.
Credit card rewards you earn for your regular spending are essentially free money. But overspending in pursuit of rewards largely nullifies the value of those rewards. Rewards are only valuable if they’re saving you money.
When to spend and when not to
Say you really want to buy a round of drinks for your friends, and the cost comes to $100. (Only well drinks next time, people!) Pay cash or by debit, and you’re out $100. Put it on a card that gives you 2% back in rewards, and your effective cost is only $98. You’ve saved $2 on drinks you were going to buy anyway.
But now say it’s time for the next round, and everyone is standing around trying not to make eye contact, lest they feel obligated to play the big shot. The thought crosses your mind: “Hey, this is an opportunity to rack up some serious points, so paying for it won’t really cost that much.” Put down that drink. You’ve had enough. You’re not “getting” $2 in that situation. You’re losing $98. (Maybe feeling like Jay Gatsby is worth it. We’re not here to judge.)
There’s a third possibility, and it’s a grand one: One person in the group agrees to pick up the tab and then everyone else pays that person back. Assuming you can trust these people to make good (they’ve been drinking, remember), you’ll want to be that person who picks up the tab. Put it on your card, and now you’re not only earning rewards on your own drinks, but you’re also earning rewards on everyone else’s drinks.
Which card to use and how
Those are the rules for when to use your card. Now it’s just a matter of which card to use. Rewards credit cards come in many flavors, just like schnapps.
No-fuss flat-rate cards pay you the same rewards on every purchase — the best ones give you back 1.5% to 2% of the purchase price. Other cards pay higher rates in certain categories, including restaurants and bars. If you like to entertain at home (in which case, every round might be on you), some cards score big at grocery stores.
Whichever card you use, pay your bill in full and on time every month. When you pay in full, you never have to pay interest — and interest can rapidly wipe out the value of any rewards you earn. Rewards cards, in particular, tend to carry higher interest rates.
Further, knowing that you’ll have to pay in full can serve as a check on random purchases. If you don’t have the money to pay for something immediately, it might not be something you need to buy at all.
And at the end of the night, if you’ve been drinking, don’t drive. Use your card to pay for a ride home. (Maybe even one that earns bonus rewards on transportation.)
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