How to Use a Credit Card to Save Money
Let's look at just some of the ways you can save money with a credit card.
24/08/2020
When someone applies for a credit card, it’s highly unlikely that their motivation for doing so is to save money. They’re more likely to conjure up images of debt, interest, and fees when it comes to what they can expect if they get accepted. However, there are multiple ways you can save money with a credit card. While some of these ways aren’t well-known, experts have used credit cards this way for years. Let's look at just some of the ways you can save money with a credit card.
0% Balance Transfer and Introductory Rates
While credit cards are known for high interest rates, they're a far more viable option if you get one with 0% interest. You can get an interest free credit card when transferring balance from another card, which means you’ll no longer be paying interest on the card you’re transferring the balance from.
Sometimes you can get a card offering 0% interest on purchases, too. So you won’t pay any interest at all as long as your purchase has been fully paid prior to the end of the interest-free period. Some cards even offer you the chance to transfer a balance from a different kind of loan, such as a student loan, a small business loan, an auto loan, or a mortgage loan.
Cashback
There’s no shortage of credit cards giving you a 1-2 per cent cashback on your purchases. It’s an attractive bonus for not doing very much at all, but there are even better savings available.
For example, you can get a credit card that offers 5 per cent back on certain categories throughout the calendar year. These categories include dining, groceries, and gas. Even better than that, you can shop online and get around 20 per cent back on your purchases from such retailers as Walmart, Target, and Home Depot.
Sign-Up Bonuses
While cashback rewards are nice, you can save even more money by being strategic about how you earn frequent flier miles from your credit cards. You can even earn sufficient miles for a free flight without spending extra money or even flying. For example, you can apply for two cards offering enough frequent flier miles to ultimately earn you a return trip flight. You just spend a reasonable minimum amount on each card, which might not be any more than what you would normally spend on your cards, anyway.
Free Checked Bags
You’ll find that a number of airline cards enable you to check in your bags for free. This one is less relevant for some, obviously, but it’s a great perk for those who travel often. Some cards allow you to check in just one bag, but there are others that let you check in multiple bags at a reduced cost. The sky’s the limit when it comes to savings whenever you travel with one of these cards.
Cost Protection
Cost protection is one of the lesser-known benefits of a credit card. Some stores offer to refund the difference if any items you’ve purchased are later included in a sale. Some credit cards offer the same benefit, with a maximum refund and a capped time limit. All you need to do is show the store an ad that provides the reduced price and submit a claim within a specified time limit of the price change.
Cash Costs
As well as being a more convenient option than cash, a credit card can help you to save more money. To withdraw cash, you’ll need to find an ATM from your bank, or you’ll often be charged around $3 in fees. While travelling, you might find that ATM withdrawals and currency conversion come with extra costs, too. With certain cards, however, you can escape international transaction fees.
Also, you’ll likely lose cash if you misplace your wallet. With a credit card, that’s unlikely to happen. Some credit cards offer no liability coverage for any unauthorised charges, which means you can dispute charges you didn’t make yourself.
Save on Loans and Increase Your Credit Score
If you have a limited or poor credit card history, you might not be eligible for loans. A credit card can be a good way for you to start building your score, even if you start with a secured credit card. Credit cards have an effect on all aspects of a FICO score. Once you’ve opened a credit card account and start showing some positive activity, such as paying bills on time, you can increase your credit score and be eligible for the best cards. A higher credit score can also lower costs on other loans.