The golden rule though is that you have to be able to commit to never carrying a balance and always paying your bills on time. If you can do these two things, you can save quite a bit of money each year using credit cards to make your everyday purchases.
I’m going to show you how to do it.
How to save money using credit cards
The biggest way to save money using credit cards is by earning credit card rewards. By having the right mix of credit cards based on your particular spending patterns, you can save a good chunk of money each year.
And there are choices out there for you. Lots of them.
There are credit cards that offer high cash back rates on dining out, some that offer rewards on travel purchases, and others that have a flat rewards structure where every purchase earns the same cash back or points.
I’m going to show you three examples of how much money a person could save per month and per year (based on their credit) by earning credit card rewards using a few key credit cards.
First, an example of a monthly budget used to optimize credit card rewards
Below is a random example of how much money you might spend each month on a few major categories:
- Groceries – $364
- Dining out – $280
- Fuel – $164
- Healthcare other than health insurance – $126
- Entertainment and Travel – $267
- Clothing – $153
How much you can earn using three different credit cards
Here’s how much you can earn using three major credit cards. I’ve picked one for bad credit, one for good credit, and one for excellent credit.
|Bad Credit Monthly Average|
Using Discover it® Secured
|Good Credit Monthly Average Using Capital One® Savor®||Excellent Credit Monthly Average Using The Citi Premier® Card|
|Grocery Rewards||$3.64||$7.28||1,092 points|
|Dining Out Rewards||$5.60||$11.20||840 points|
|Fuel Rewards||$1.07 + $1.11 (maxes out quarterly $1,000 limit)||$1.64||492 points|
|Healthcare Rewards||$1.26||$1.26||126 points|
|Entertainment & Travel Rewards||$2.67||$10.68||267 points|
|Clothing Rewards||$1.53||$1.53||153 points|
|Total Rewards (Monthly)||$16.88||$33.59||2,970 points|
|Annual Fees in Year 2+||$0||$95||$95|
|Total Rewards after Annual Fees||$202.56||$308.08||2,875 points|
In my experience, these are three of the strongest rewards cards. But as you can see, some offer better rewards in certain categories. That’s why it can be beneficial to mix-and-match cards (without going overboard, of course) so you can earn the most rewards.
Bad credit/Credit card combos
If you have bad credit and want to earn credit card rewards, you’ve got to make sure you can always pay your credit card balance off in full.
If you can’t, you’ll likely end up paying more money in interest and fees than you will earn in rewards in the vast majority of cases. And that’s a dangerous road to be driving down.
To get you started on the right track, you’ve seen already that I like the Discover it® Secured card – one of the only poor credit score credit cards that offers rewards.
While you won’t get top-notch rewards as you would with some of Discover’s other cards, with the Discover it® Secured you’ll still earn 2% at gas stations and restaurants (on up to $1,000 in combined purchases each quarter), and 1% on all other purchases.
Know that you will have to pay a $200 deposit to secure a $200 line of credit. This is to make sure that if you don’t pay your bill, Discover is covered and will deduct the amount from your deposit.
Other cards to consider if you have poor credit
While Discover it® Secured is one of the better-secured cards on the market, it isn’t necessarily the be-all and end-all card if your credit is not stellar.
Good credit/Credit card combos
When you have good credit, getting a credit card with good rewards becomes a heck of a lot easier. Here’s some of my favorite cards that can help you if you’ve got with good credit to maximize the cash back part of the card.
The Capital One® Savor® credit card offers 4% cash back on dining and entertainment and 2% at grocery stores. There is no annual fee in year one, but there is a $95 annual fee each year thereafter. So the annual fee is something you’ve got to watch to be sure you want to go this route.
But I’ve got to say, this card is a dream for those of us who like to go out on the town. It offers an almost unheard of amount of cash back all the time, not just on rotating categories.
But it’s not just for those who like to dine out. It’s also a great grocery reward credit card as well because you’ll also earn a lower cash back rate on ALL your purchases. So that’s pretty sweet if I say so myself.
Other cards to consider if you’ve got good credit
While the Capital One® Savor® is a great dining out card, it may not be the right rewards category for you. Here are a few more cards worth considering:
What We Like:
Awesome $200 cash back bonus after spending $500 on purchases in the first 3 months from account opening
Earn 5% on travel purchased through Chase, 3% on dining at restaurants and drugstores, and 1% on all other purchases
0% Intro APR for 15 months from account opening on purchases, then a variable APR of 14.99 – 23.74%
- Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening.
- Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter!
- Earn 5% on travel purchased through Chase, 3% on dining at restaurants and drugstores, and 1% on all other purchases.
- No annual fee.
- 0% Intro APR for 15 months from account opening on purchases, then a variable APR of 14.99 - 23.74%.
- No minimum to redeem for cash back. Cash Back rewards do not expire as long as your account is open.
Chase Freedom Flex℠ is a great card for saving money because you get the 5% cash back on up to $1,500 in combined purchases in rotating categories each quarter of the year. This can amount to huge savings. For example for 2021, the categories are:
- Jan – March – Wholesale clubs, internet, cable, and phone services, and select streaming services
- April – June – Coming soon
- July – September – Coming soon
- October – December – Coming soon
There are so many more cash back opportunities with this card: 5% cash back on travel purchases when you book through Chase Ultimate rewards, 3% cash back on dining, takeout, and drug store purchases, and unlimited 1% cash back on all other purchases.
Excellent credit/Credit card combos
If you have excellent credit, you have the largest number of options for maximizing your cash back. Here are a few cards that can help:
What We Like:
60,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening. These points are redeemable for $600 in gift cards at thankyou.com
Three points per dollar spent at Gas Stations, Supermarkets, Restaurants, Hotels and on Air Travel
No foreign transaction fees
- Earn 60,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening
- Earn 3 Points per $1 spent at Restaurants and Supermarkets
- Earn 3 Points per $1 spent at Gas Stations, Air Travel and Hotels
- Earn 1 Point per $1 spent on all other purchases
- Annual Hotel Savings Benefit
- 60,000 Points are redeemable for $600 in gift cards when redeemed at thankyou.com
- No expiration and no limit to the amount of points you can earn with this card
- No Foreign Transaction Fees on purchases
For those who love to travel and have good to excellent credit, the Citi Premier® Card may be the one for you.
It doesn’t come with a confusing rewards system of rotating categories you have to activate. You’ll earn 3x points per dollar spent at restaurants, supermarkets, gas stations, hotels, and on air travel. Plus, you’ll earn 1x points per dollar spent on all other purchases.
But one of the most appealing benefits for frequent travelers is the $100 savings you’ll get on one hotel stay of $500 or more each year. You can use this bonus for business travel or to take some time off and relax.
Other cards to consider if you’ve got excellent credit
The Citi Premier® Card is for frequent travelers, but here’s another alternative for those who prefer to stay in one place:
Discover it® Balance Transfer
Discover it® Balance Transfer is another great option – you can earn 5% cash back on up to $1500 in purchases after activating at different places each quarter. This is another great way to save money if you’re spending anyhow.
Here’s the rotating category calendar:
- October – December 2019 – Amazon.com, Target, and Walmart.com
- January – March 2020 – Grocery Stores, Walgreens, and CVS
- April -June 2020 – Gas stations, Uber, Lyft, and Wholesale Clubs
- July – September 2020 – Restaurants and PayPal
- October – December 2020 – Amazon.com, Walmart.com, and Target.com
Lots of savings possibilities with the Discover it® Balance Transfer credit card
Credit card benefits you can use to save money
While credit card rewards offer the ability to earn cash back on your spending, credit cards also offer a handful of other benefits that most people aren’t aware of and don’t use on a regular basis. These benefits can result in hundreds of dollars in savings per year depending on your purchases.
Some credit cards essentially give you protection from buying an item then seeing the item’s price decrease after you buy it.
For example, the Capital One® Savor® Rewards Credit Card offers price protection for up to 120 days after you buy an item. Meaning, if you buy an item with your card but find it somewhere else cheaper, Capital One will reimburse you for the difference.
When you purchase large items, salespeople normally ask if you want to buy an extended warranty. These warranties can be costly and you may never use it. However, if you make your purchase with a credit card, you may qualify for your credit card’s extended warranty coverage for free.
Travel insurances, including rental car insurance
If you love traveling, credit cards can offer plenty of protection in case something happens on your trip.
The Chase Sapphire Preferred® Card offers free trip cancellation/interruption insurance up to $10,000 per trip, auto rental collision damage waiver to cover theft and collision damage for most rental cars in the US and abroad, baggage delay insurance, and trip delay reimbursement.
0% balance transfer offers to pay off debt
If you’re working to pay off debt, you may want to consider a credit card that offers a 0% introductory APR period on balance transfer.
Here’s a list of balance transfer credit cards to check out. There’s definitely a lot of options out there.
How much you can earn depends on your spending habits. If you can use the right credit cards for the right spending categories, you could earn hundreds or more each year with each one of the cards.
But you absolutely have got to make sure to utilize credit cards correctly (strategically) and pay them off in full every month.
If you don’t, all those rewards you earn go straight towards paying off interest. And that’s for sure the wrong way to go on this one.