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How to Gain Credit Card Rewards - Without the Debt

Thursday, June 26, 2014

Credit cards have gotten a bad reputation over the years. It's true that irresponsible spending on a credit card can lead to insurmountable debt, but responsible spending on a credit card can help with large purchases and even result in bonus cash or rewards.

What rewards could you be getting from using a credit card?

  • Cash back: Get up to 5% back on purchases you already make.
  • Airline miles: Some companies will offer up to two miles per dollar spent. You can also use those "miles" as credit for other travel expenses, such as lodging and gas.
  • Supplementary insurance: This may include rental car collision insurance, trip cancellation insurance, or even cell phone replacement insurance.
  • Extended purchase warranties: Buying a computer, TV, or another product you are worried about damaging? Rather than paying for additional coverage, some carriers will extend your warranty up to one year without charge.
  • Hotel and travel points: If you travel often without flying, this card is a great alternative to frequent flyer miles.
  • General reward points: With each dollar you spend, you'll be on your way to gift cards, electronics, jewellery, and other items.
  • Gas rewards: Earn points or cash back when you fuel up your vehicle.

Remember, these "free" offers aren't free unless you are careful about your spending. Here are the top two tips for gaining rewards and skipping debt:

1. Choose a card based on your current situation.

Consider your future purchases and which rewards you will actually use.

If you travel frequently, then it makes sense to accumulate points for airline flights, hotels, etc. However, if you just want a travel points card for the sake of getting a free flight now and then, know that you are unlikely to spend enough money to get a flight and offset the annual fee and interest you are paying.

Get a gas rewards card if you have a long commute for your job. Look for extended purchases warranties if you are planning on purchasing a major electronic device. There are plenty of options out there, so choose the best fit.

There's no shame in skipping the rewards altogether. If you are already in debt or do not plan on using a credit card very often, look for credit cards with no annual fee, no penalty rates, and a lower APR. Having those features is a reward in itself.

2. Do not spend money you normally wouldn't just to get rewards.

Although credit cards give you access to higher funds, the best advice is to still live within your means. Pay off your bills each month to avoid penalty fees or a higher interest rate.

Credit card rewards can be dangerous if they encourage needless or excessive spending. For example, most credit card companies will offer a signup bonus if you spend a minimum, which could be $1000 or $5000, in your first three months of use. These bonuses are nice - but that extra money won't matter if you can't pay off the original bill.

Your rewards should be an added perk to your credit card, not a goal to reach. Spend as usual, and enjoy the points or cash back that follow.

Abakhan & Associates Inc. is in the business of preventing debt, and it all starts with spending money responsibility. With the right mentality, you can have a positive, beneficial experience with credit card companies. Try signing up and reaping the rewards today. Contact any of our locations in Vancouver, Victoria, Vernon or Surrey.

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