Going out on a budget can be hard work. There are so many ways to spend more money, and it’s so easy to splurge, that it can be tiring and time-consuming trying to combat all those little expenses that drag down your cash. That’s why sometimes it’s nice to have easy, clear-cut choices about ways to save money that you should always take advantage of. Here’s one of those: if at all possible, always pay with a credit card.
That’s right: save money by paying with plastic. Not only is cash old fashioned, but it’s actually costing you every time you throw it down. I know that cultural guilt around going into debt—not to mention stereotypes about poor planning with credit cards—make it hard to fathom, but you should pay with your credit card every time you go out, if possible. And while I don’t advise conning your friends into paying cash, if they insist on doing cash than you should offer to pay the whole bill on your card, and take the cash straight to your bank. Here are a few reasons why you should always pack plastic and should never be afraid to use it.
If you are like me, you are very diligent about always paying off your credit card every month whenever at all possible. This makes for a good question: if I never give the credit card company an extra penny, how do they make any money? Of course they make money on some people, but why would they want me as a client at all?
The answer is: fees! Credit card companies charge merchants fees, often around 3% of the total transaction–although the rates can vary. So when you ring up $100 at Whole Foods and pay with a card, a couple bucks are making their way to Visa, Mastercard, or whomever.
This means two things: first, if you pay cash then you are getting ripped off. The store is making extra profit off of you just because you used cash! Second, it means that you should pay with a credit card whenever possible. Not to punish the store, but in order to get in on the action!
The most obvious way to do this is with rewards points. Many cards have a standard 1% back deal–my Discover Card works like that. Every transaction, I get 1% back. This means that on my $100 purchase, Whole Foods sends discover $3 and Discover sends $1 back to me. Now, 1% doesn’t sound like much, but over time it adds up!
Furthermore, many cards have specials where you can earn double points (or more!) on certain types of transactions–say, 5% back on gas for the month. Watch for these deals and you’ll quickly finding the rewards stacking up!
An extra bonus comes when you redeem your rewards points. You can often get the points back as a bill credit once you hit a certain level, or you can use them on often kitschy or overpriced merchandise. However, one excellent thing to do with your rewards points is to buy gift cards! In many instances, you get a much better return if you go for the gift card. If your points are worth a $50 bill credit, you might be able to get $60 or even $100 put on a gift card! This makes going out easier, cheaper, and much more worth it. Make sure you can redeem your points for a gift card to somewhere you actually go, but as long as you meet that requirement you can get serious bucks here.
If you don’t have a credit card yet, or are shopping for a new one, it’s often the case that cards have special rewards upon signup. For instance, a special on Capital One cards recently, they promised to double the rewards payout that you earned in your first year. Not a bad deal! If you spend, say, $5,000 on your card in the year and get 1% back then they’d end up sending you $100 for the year–plenty enough for a night out on the town, especially if you redeem for a double-points gift card. Not a bad return, for literally no extra money!
While nobody likes being in debt, and many people feel more comfortable with cash, credit cards are the way to go with as many purchases as possible. Be sure to pay off the bill every month whenever possible, otherwise you’ll lose the return on paying much higher interest rates. But as long as you pay it off, you’ll end up reaping the rewards that you’d otherwise be missing out on by paying in cash. A little here, a little there, and soon your trip out is paying for itself! While it won’t pay off immediately, getting 1% or more back will add up in the long run, and let’s fact it–when dining on a budget, every little bit counts.
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