As a college student or young professional, It is sure you’re focused on paying off your credit card debt and saving for the future. You probably know that cashback rewards are one of the best ways to do both. But have you ever wondered what to do with them? Here’s what good financial advisors would tell you:
Make good use of them
If you use a credit card with 3% cash back rewards, you must use them well. SoFi experts say, “You will be earning your rewards right away.” Here are some tips:
- Use your credit card for everyday purchases. When you pay off your balance each month and don’t carry a balance, it’s like getting free money on every purchase and earning interest on the money in your account!
- Keep the credit limit manageable. Try not to let your balance get higher than 30% of your limit, as this will lower the credit score rating, which can affect future borrowing ability.
Use your rewards cards for travel
If you’re a frequent traveler, don’t forget to use your rewards cards for travel. You can get discounts on flights and hotel stays with rewards that will save you money. If you’re not a frequent traveler, there’s no better time than now to start!
Learn how to maximize the business cards
The best way to get the most out of your cashback business cards is by keeping two separate credit cards, or at least a personal and a business one. This will allow you to track your expenses and ensure they are set up properly so they can earn rewards.
If there is any overlap between the two cards, it can be helpful to use whichever card pays out more in cash back on its own specific category of expenses. For example: if one card offers 2% cash back for gas purchases, but only 1% for restaurants and another offers 3% on both categories, then it makes sense to use that second card when buying groceries because it provides more value overall (3% vs. 2%).
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Create a personal budget and stick to it
The first thing you need to do is create a personal budget and stick to it. Make sure that you don’t spend more than you earn. Don’t use credit cards for everyday purchases like groceries or gas—these should be paid off each month with the money that came in from your paycheck.
If you can’t pay off all of the balance on a credit card payment due date, then pay as much as possible so that at least half of the total bill gets paid off each month. Credit cards have no place in your life if they are only used for cash advances (when you withdraw cash) or payments on other credit cards (paying another person’s bills).
The next time you find some extra cash in your pocket, consider using it to pay off your credit card balance. You can also use it to buy things you usually wouldn’t be able to afford with just cash.