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- I was surprised when my mom revealed she’d let over $4,600 in cash-back rewards accumulate in her credit card account.
- She’ll use that money toward special purchases for herself and my dad, but her strategy got me thinking about changing how I use rewards from my credit card.
- My husband and I now plan to take a hands-off approach and let our credit card rewards build as a sort of savings account to reach our goals, instead of cashing in our rewards to pay off our bills.
- Our dream is to save enough for a two-week vacation after the pandemic is over, and we’re looking at applying for a cash-back credit card to speed up the process.
- Read Business Insider’s guide to the best cash-back credit cards.
I’m a big fan of getting results for little or no effort — I doubt I’m the only one who likes easy wins. One thing I enjoy is enrolling in loyalty programs with every business I frequent that offers one. I have a Starbucks Rewards card as well as cards from many restaurants where I dine and at my favorite casino resort.
Loyalty or rewards programs influence my spending behavior. I’m more likely to go to a place where I earn points so that I can eventually receive a free coffee, meal, discounts on a massage, or a complimentary hotel room. The same principle applies to rewards credit cards.
My husband and I put every bill and purchase we can on our credit card to build up rewards — from groceries, gas, insurance, clothing, books, phone bills, and entertainment, we pay them all with a credit card that offers cash back for points. One important thing to note is that we use a card with no annual fee, and we pay our monthly bill in full. No amount of rewards can make up the cost of interest on a credit card debt.
Recently my mom told me she had over $4,600 in cash-back rewards in her credit card account. I said to my mom, “You can pay off your credit card for several months with that money!” My mom said that no, she wanted to save the money for something unique. It turns out that something special will be hearing aids for her and a select pair of prescription glasses for my dad.
The fact that my mom’s rewards had grown untouched for such a long time made me rethink my credit card strategy this year.
Cash-back rewards as a savings method
When I asked my mom how long it took her to build up such a significant amount, the closest she could guess was four or more years. Like me, my mom uses her card for every possible expense, including prescriptions and insurance. She also pays her card in full each month, making the rewards more valuable.
My husband and I save our credit card rewards as well. Still, in an average year, we cash them in around the end of December, pay our credit card bill, and use the extra money to fund some of the expenses around the holidays like presents, travel, and New Year’s resolutions.
The easy part comes in here: Who wouldn’t want a savings account that grew each month without taking any money away from the monthly budget? That is how my husband and I are going to treat our cash-back rewards cards from now on. Our rewards will be a savings account that we let grow until we have reached the amount necessary to purchase something special.
Our current dream is to go on a two-week vacation far from home. During the pandemic, we have not traveled at all. We fantasize about a time after the vaccine is widely distributed where we can take a nice long vacation to a place we have never been or haven’t been in a long time.
We currently use a USAA card that offers 2 points per dollar for gas and dining out and 1 point for all other qualifying purchases. Most reward points with this card are worth approximately 1 cent each. Obviously, at that rate, it is going to take a long time for us to save for a vacation even though we are only planning to build up enough rewards to pay for the cost of the airline ticket.
I’m now considering another USAA card that offers 1.5% cash back on all purchases, because that makes more sense for our no-effort savings account. With cash back only, we will reach our goal much sooner. I would encourage everyone to research the best credit card offers because many of the banks offer a welcome bonus that can get you closer to your goals in a hurry.
We’ve been spending some of our quiet evenings talking about where we would like to go, who we might like to see, and what kind of trip it would be — for example, a cultural tour, a resort-type vacation, or an overseas adventure. Right now, planning is proving to be entertainment. I can imagine the same type of fun saving up rewards for a honeymoon, new furniture, or anything else that is on your list of future wants or dreams.
I’m not sure how long it will take us to build up the rewards for our dream vacation, as this year has been leaner in terms of spending than in previous years. It might have taken us 18 months to build up the necessary points for two round-trip tickets in a typical year, but this year our spending has been far less.
We both work from home, so we haven’t had transportation costs or clothing costs, and we have eaten almost every meal and drank every cup of coffee in the safe space of our kitchen. But adding the points we already have to the points we’ll earn from increased holiday spending, we’ll get there purchase by purchase.
While my husband and I get through the shorter, darker winter days trying to decide on a destination like Hawaii or Europe, maybe you will decide to collect rewards as a no-pain saving method too. Your goals might look very different from ours, but whether your reward sights are on a dining room makeover, new computer, or video game console, building a stash of rewards makes it possible to daydream.
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