I always talk about getting out of debt on this site and honestly, it probably could be the most single important financial decision you can make for you and your family. Not owing anything to anyone is a great feeling and enables you to make choices in your life that you otherwise would not be able to make. Once you are out of debt, your options to actually make money off your credit cards are just beginning! So this post is for those of you who are already out of credit card debt and are looking for a way to maximize your rewards card earnings so they can pay you, instead of you paying them.
There are a ton of different credit cards available to the average consumer, and the smart ones choose cards that either give them airline miles, actual cash back, or discounts on things that they do frequently. We have chosen to maximize the rewards on two of our cards; our American Airlines mileage card from Citibank and our Dividends card, also from Citibank. Although we have other credit cards (namely my business AE card), these are the only 2 we really charge anything on…the others are just around because I have had them since college and I don’t want to remove them from my credit history.
The AA card is used to pay all of our recurring monthly bills – Netflix, Tivo, electric bill, gas bill, Vonage bill, the cable bill, etc. On average, these things cost us about $300 per month…and every dime of that is charged to our AA credit card. Over the course of a year, that earns us at least 3,600 miles on American Airlines for things that we would have been spending money on anyway! These are things that we could be paying for out of our checking account, but why not get something back for paying them? We also charge every dollar of any travel we do – whether it is rental car, airplane, or our upcoming trip by train – so that adds up to a significant amount as well.
As for the dividends card, we earn 5% back on any purchases at the grocery store or gas stations, so we use the card for any purchases at these type of stores. We also use this card for any online purchases, just to pad the dividend dollar with an extra 1% on these type of purchases. Since we spend about $400 a month on groceries and about $150 on gas alone, that pays us back 5% of $550 every month – or $27.50 for those of you who love math. If you look at it like that, we get an automatic 5% discount on these purchases just by using the card!
The key to paying your bills by credit card is to make sure you can pay off the bill in full when it comes each month. For some people, it is easier to pay each bill as you get it – and I understand that, as I used to be like that as well. But the rewards are too much to give up by doing that, so we started having everything paid automatically. The other upside to doing it this way is that everything is always paid on time…there are no more late payments, lost envelopes, or worrying about a bill because you went away for the weekend.
So if you are out of debt and looking for a way to have the credit card companies pay you for using their cards, be sure you are taking full advantage of any rewards that your card(s) may offer. If you are not using a rewards card but you have decent credit, you might be missing out on a lot of rewards and you should sign up for one and start using it. It’s a great feeling earning something from your credit cards!