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Using a cash-back credit card can help you offset price increases by putting money back in your wallet.
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As prices continue to rise, sticking to a budget is becoming more challenging.
Using a cash-back credit card can put money back in your pocket and take the sting out of inflation.
Choose a cash-back credit card that rewards you in the categories where you spend the most.
Read Insider’s guide to the best cash-back credit cards.
It’s hard not to think about inflation on a daily basis. Since the start of this year, it’s started to creep into almost every purchase that we as consumers are making, from groceries to gas. According to the US Bureau of Labor Statistics, the Consumer Price Index for all items increased 8.3% from August 2021 to August 2022.
As consumers, trying to figure out how to purchase essential items while sticking to a budget can be extra tough when prices continue to rise. But one interesting way to fight against inflation is by using a cash-back credit card, which can provide rewards for your daily purchases.
Here are three ways using a cash-back card can help you put more money back into your wallet during this period of inflation.
We’re focused here on the rewards and perks that come with each card. These cards won’t be worth it if you’re paying interest or late fees. When using a credit card, it’s important to pay your balance in full each month, make payments on time, and only spend what you can afford to pay.
Cash back credit card rewards can offset rising costs
One of the best parts of having a cash-back credit card is getting money back on all of the purchases that you make. You can usually redeem this cash as a statement credit to offset your balance, or as money that you deposit in your bank account. Either way, getting money back on any purchase effectively lowers the price of that item.
For example, the Blue Cash Preferred® Card from American Express earns 6% back on your first $6,000 in U.S. supermarket spending each year (then 1% back). If you use the card to pay for $250 in groceries, your bill would essentially be reduced by $15 (cash back is earned in the form of Rewards Dollars). With consumer food prices increasing by 11.4% in the last year, earning 6% back on groceries by using this cash-back card can help offset higher prices.
When you’re looking for a cash-back card, it’s best to know what categories you spend the most in every month and find a card that rewards you with bonus cash back for those categories. If your spending fluctuates, you can go with a card like the Citi Custom Cash℠ Card, which offers 5% cash back on up to $500 in purchases in the eligible category you spend the most in each billing cycle (then 1%). Here’s our Citi Custom Cash review with more details.
Using a rewards credit card makes more sense than paying with cash
When we’re in a period of inflation, our cash doesn’t go as far as it used to. Paying with cash or debit doesn’t give you any benefit at all, which can feel frustrating.
Instead, when you use a cash-back card, you’re guaranteed to earn rewards on every single purchase that you make. While many cash-back cards have categories that earn bonus rewards for different types of spending, it doesn’t have to be that complicated. Using a flat-rate rewards card like the Wells Fargo Active Cash® Card, which offers 2% cash rewards on purchases you make, is a simple way to earn something back for your purchases without having to keep track of bonus categories.
While getting cash back, whether 5% or 2%, doesn’t fully make up for the increased prices caused by inflation, it’s better than getting 0% back when you just use cash.
Using a credit card instead of a debit card has another advantage, besides earning rewards. You’re better protected against fraud when you use a credit card.
Cash back credit cards come with other money-saving benefits
When you’re starting to notice that the amount of money you’re spending every month keeps increasing because of inflation, any type of extra benefit or reward can help out with your finances.
For example, the Chase Freedom Unlimited® offers new cardholders a Chase Freedom Unlimited® (then a Chase Freedom Unlimited® APR). This can help if you have large purchases you need to pay off over a longer period of time, or want to consolidate high-interest debt by doing a balance transfer. The card comes with a welcome bonus offer of Chase Freedom Unlimited®, and it earns 5% back on travel booked through Chase, 3% back on dining and drugstores, and 1.5% back on all other purchases.
In addition, many cash-back cards come with extra protection and insurance that can save you money if something goes wrong with your purchase. For instance, when you use the Chase Freedom Unlimited® to pay, you’re eligible for purchase protection, secondary car rental insurance, extended warranty, and trip cancellation/interruption insurance. Read our Chase Freedom Unlimited review to find out more.