Have a credit card — will save

Contrary to the common belief that credit cards are the source of our debt and the root of all the evil, I can think of at least a few opportunities to actually save money by using credit cards.

Some of them will require discipline and systematic approach and will not work for all. Some are as easy as not forgetting to check a merchant before buying something. Nevertheless I have been actively using all of them and encourage you to get familiar as well.

Cash back/rewards credit cards

I have been using credit cards to get cash back and other rewards on my purchases. All cards offer different rewards and I have to carry a few to use each on different occasion. Here are 3 cards that I have with me all the time.

Discover Gas CardThis is the card I use at the gas station and for other car related expenses (auto wash, oil change or repairs). It earns flat 5% cash back on these and 1% on everything else. Sometimes I also use it at convenience shops by the gas stations. The credit card agency will log the milk I buy as a gas purchase and I will still get my 5% cash back.

Cash back is unlimited and never expires so I can collect it over a few years. As far as redeeming it, I have a few options. I can get it as cash or (and I like this option more) I can turn it into a gift card at certain merchants at half the face value of the gift card. There a few merchants available but the place I like the most is The Sharper Image. There are some decent gadget over there. Cutting the price in half turns them into bargains.

American Express CostcoI received my TrueEarnings American Express card from Costco and it doubles as my membership card over there. The card earns me 3% cash back for eating out, 2% back for traveling, and 1% for everywhere else. I use it in restaurants, for travel related expenses (air tickets, hotels, vacation packages), and for my shopping at Costco (since this is the only card they accept).

The rewards are calculated during the year and are redeemed in February of the following year in a form of a check issued to Costco. You then just bring it and pay for your purchases over there. There is no limit on how much you can earn during the year.

The only inconvenience with this card is that it is bound to your Costco membership and if you cancel it your rewards accumulated during the year will be lost.

Citi Divident Platinum SelectUntil recently I used this card for all my supermarket and grocery store purchases as it was paying flat 5% cash back. Recently the percentage has lowered to 2% and I am in search for an alternative. Do you have any ideas on what could replace this card?

If you have an older car and have a lot of car related expenses, then take a look at Drivers Edge from Citibank (this card has been discontinued). It will pay 6% flat on purchases you make at supermarkets, drugstores and gas stations during the first 12 months of the life of your account and 3% thereafter. The cash is redeemable in exchange for car related expenses (car service or purchases). What I don’t like about this card is that I have to mail a form with my receipts to get the cash, which is a lot of hassle.

Important. Make sure to carry no balance and always pay your monthly bill in full. The credit card interest on your balance will quickly eliminate any cash back rewards you receive.

0% balance transfer offers

Sometimes I get on one of these offers to save on interest I would have to pay if I chose to borrow the money from the bank. I am very careful with these however and only borrow for the expense that I know will result in additional savings. Here are a couple of examples.

Pay off hight interest loan

I reassessed my house in 2005 and was around $6000 short to meet the bank requirement to remove PMI payments from my loan. I used one of the 0% balance transfer offers to load this amount to a credit card which I am now paying out. The savings come in a form of missing PMI payments plus whatever I save with the early payment I made against the loan principle.

Other applications may include financing a part of your car loan or a minor home improvement project.

Pay for education

My wife works at school and last year she needed to take certification to get promoted from an assistant to a teaching position. The classes cost around $5000 but she would get a salary increase if she passed the certification. So I used one of these offers again to load my card and then used the difference in salary to pay it out.

Use as investment

I have not personally done this but I know many who did. You basically borrow from the card and invest into a Certificate of Deposit or another savings account. Only invest into accounts with guaranteed savings. Avoid stocks or other high risk alternatives.

Sounds convincing? Jonathan at MyMoneyBlog keeps track of No Fee, 0% balance transfer offers at his blog, which I highly recommend.

Important. Whatever option you choose, be prepared to find an alternative source of credit if bank terminates your credit card account. It has never happened to me, but it is theoretically possible.

Discounts for credit card holders

Each of the three major credit cards has a website dedicated to bargain hunter. It will list recent promotions from participating merchants that offer discounts to the credit card holders. All you need to do is use the provider link or discount code when you make your purchase, and of course charge it to the appropriate credit card.

From my experience it is hard to find really hot bargains at these websites, but they are certainly worth a try. There are quite a few merchants and if you are buying something anyway (and not just looking for bargains) make sure to go through this list.

Disclaimer. The information provided on this page is not a financial advice and I am not a financial professional. Use the above mentioned tips at your risk. They all worked for me but I can’t guarantee they will suit your needs as well.

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4 Responses to “Have a credit card — will save”

  1. 1 Credit Card Cashback Rewards Deal Enthusiast Mar 25th, 2007 at 7:50 pm

    I love your approach to using rewards cards. The mix of cards you use is quite good. It’s worth mentioning that different spending profiles have different optimal mixes of reward credit cards.

    To find a combination of cards that’s good for a given spending profile, one can try the rewards calculator at .

  2. 2 better credit card user Apr 26th, 2007 at 4:17 am

    You can save with your credit cards only if use them properly. Make your payments regularly on time and do not let any negatives be reflected on your credit report. When you build strong credit, you can apply for a credit card with alluring features and terms and pay low interest rates on purchases (the important item), no balance transfer fees, no annual fee and save your money.

  1. 1 Carnival Of Personal Finance Number 89: The Celebrity Edition Pingback on Feb 26th, 2007 at 12:03 am
  2. 2 kmull Trackback on Feb 26th, 2007 at 4:22 pm

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