The 5 Most Effective Ways to Consolidate Credit Card Debt

Dealing with credit card debt can be overwhelming. If you’re having trouble making your payments, consolidating your credit card debt may be an effective solution to your problems. The best way to consolidate credit card…

The post The 5 Most Effective Ways to Consolidate Credit Card Debt appeared first on Crediful.

Source: crediful.com

The Shame of Debt

Money doesn’t make you happy. That’s how the saying goes, and you can’t deny that there’s some truth to it. However, while having lots of money won’t make you happy, having very little is more likely to make you stressed and depressed. 

The less you have, the more likely you are to stress over the smallest of things, and if debt is forcing that poverty on you, hanging a dark cloud of uncertainty over your head, that stress and that depression will increase.

Psychological Cost of Debt

Debt has a massive psychological cost and a lot of that boils down to shame. Debt stress and debt shame are more common than ever in the United States, as debtors seek to hide their troubles from their families and loved ones. There is an unmistakable link between debt and an increased suicide risk.

A student conducted several years ago looked at the finances of people who had committed suicide and found they were significantly more likely to have massive debts (student loan debt, credit card debt). Similar studies have been conducted on mental health, noting that people are more likely to suffer from debilitating depression, stress, and anxiety when they have problems with debt.

And it’s easy to see why. Not only do many debtors choose to keep their problems to themselves, feeling an immense shame that stops them from telling even their closest friends and family, but debt can also lead to anxieties about debt collectors, foreclosures, repossessions, bankruptcy, and more. 

How to Overcome the Shame of Debt

To improve your mental health, you need to fight debt stress and shame. That’s easier said than done, but there are a few things that you can do:

Understand Where the Shame Comes From

The first step is to understand why you feel the way that you feel. This might not fix your debt shame, but it will help you to understand it more.

There is no single, overriding cause of debt shame. Some debtors feel shame because they see themselves as the breadwinner, the provider, and if they have debt it means they have failed. Others feel shame because they come from frugal backgrounds and have been wasteful or because their debt is the result of a drug, alcohol or gambling problem.

Whatever the reason, you need to find it, address it, and fix it. Get help for that gambling or drug addiction, get advice from that frugal family.

Admit Your Fault

Debt doesn’t mean that you’re a bad or useless person. It doesn’t mean that you don’t care about your family. It’s not a character flaw tied to your personality, it’s a behavioral issue tied to impulsivity and even mental health issues. It’s still your fault, but it’s easily fixed and doesn’t make you a bad person.

Understanding this can help you to get rid of that shame and deal with your stress and mental health issues.

Improve Your Financial Knowledge

Researchers have found a direct correlation between debt and financial knowledge; the more you have of the former, the less likely you are to be competent in the latter.

Fortunately, it has never been easier to educate yourself. Take a look at the many guides here on Pocket your Dollars, spanning everything from pay off strategies for credit card debt to money-making ideas, recommendations for loans and credit cards, and more.

Get Credit Counseling

Credit counseling exists for a reason and can help you in your time of need. They’re not mental health counselors, they can’t prescribe you medication and they can’t help with your insomnia and anxiety. However, they have worked with countless debtors, many of which have anxiety and depression, and they understand what it’s like to be in your shoes.

They can help you to assess and manage your debts before advising on the right course of action. A financial therapist can also provide assistance with any relationship issues, counseling you on who you should tell, how you should tell them, and what sort of reaction to expect.

The problem that many debtors have is that they think they know everything. They won’t speak to a counsellor because they’re convinced they know what the counsellor will say. But let’s be honest, if you’re struggling with debt, there’s a good chance you’re not a financial wizard and even if you are, it always helps to speak with an expert, voicing your concerns out loud and bouncing some ideas around.

Stop Spending

We spend when we’re depressed, get depressed because we’re in debt and are in debt because we spend too much. It’s a cycle that’s keeping your favorite retailer in profit and doing untold damage to your finances. To get out of debt, you need to accept that this cycle exists and that the only way to escape is to stop that spending immediately.

Anything that isn’t an absolute necessity can be left for another day, preferably one when you actually have money to spend. Limit your spending to clothes, food, rent, utility bills, medical bills, and everything else that allows you to continue living comfortably from day to day, but give the alcohol, cigarettes, vacations, and other luxuries a miss.

How to Take Control of Your Debt

The best way to avoid the shame and stress of debt is to get rid of it. Studies on debtors have found that at least 9 out of 10 believe they will be much happier if they didn’t have debt. These beliefs have been confirmed by individuals who successfully pay off debt, claiming = they are much happier than they ever were.

There are many ways you can pay off debt and we’ll look at a few of these options below, but generally speaking, you need to:

  • Assess your financial situation
  • Check your credit report and credit score
  • Get help from a credit counselor or financial therapist
  • If your debt-to-income ratio is low, budget better and pay off more with a debt payoff strategy
  • If your debt-to-income ratio is high, try debt relief
  • Create an emergency fund to prevent future issues

Best Ways to Get out of Debt

There is no debt shame if there is no debt. As discussed above, debt is not something you should be ashamed of, but it’s also not something you should cling onto. It can cause you a great deal of stress, placing strain on your relationships and generally making life very difficult for you.

So, while it’s important to face the truth of the situation and dispel those feelings of shame, it’s just as important to fight your debt and get your head above water. Here are a few debt relief options and debt payoff strategies that can help. For more information, including expensive guides and recommendations on each of these options, take a look at the relevant sections on Pocket Your Dollars.

Snowball and Avalanche Methods

The debt snowball and debt avalanche methods are two of the most popular debt payoff strategies, and ones that we have discussed at great length before (see debt snowball vs debt avalanche). They can make the process more systematic, which, in turn, may provide you with the support and the structure you need to get your debts in order. 

In both cases, you need to make a list of all your debts, covering things such as Balance, Monthly Payment, and Interest Rate. For debt snowball, sort the list by balance and go from the smallest to the largest. For debt avalanche, focus on the debts that have the highest interest rate and get those out of the way first. With both methods, you need to keep meeting your monthly payment obligations, before putting any extra money you have towards your chosen debt.

Debt avalanche provides the most practical benefits as it clears the problematic debts first, thus reducing the total interest. Debt snowball provides more of a psychological boost, giving you motivation as you steadily clear your debts.

Major Sacrifices

The biggest issue with any debt payoff strategy is that it isn’t easy to get the extra money you need to make those additional payments and clear your debts early. However, many debtors are trapped in a cycle of debt not because they can’t scrape the cents together no matter how hard they try, but because they struggle to budget properly and make the necessary sacrifices.

The average American debtor spends thousands of dollars every year on uneaten groceries, lottery tickets, and media subscriptions. They drop hundreds of dollars on luxuries they don’t really need and spend over $3,500 a year eating out. If debt is dragging you down then it’s imperative that you clear it, which means making some sacrifices and getting your priorities in check.

If you genuinely can’t spare a dime and don’t waste money on unnecessary expenses, then look into some of the options below.

Debt Settlement

Debt settlement is tailor-made for unsecured debt and works especially well for clearing credit card debt, as well as private students. Debt settlement companies often request that you stop meeting your monthly payment obligations, which puts the accounts into doubt and means your creditors are more likely to accept a settlement.

This settlement will clear the entirety of the debt for a fraction of the price, often around 50%. This means that a credit card debt of $10,000 would be cleared for $5,000, providing you with some big savings even after the settlement fees have been taken into account.

Debt Consolidation

A consolidation loan is a large loan that pays off all of your debt at a reduced interest rate and for a reduced monthly payment. The loan is often extended by several years, which means you pay more in the long-term, but the reduced monthly payments alleviate some of the burden and make the debt more manageable.

Debt Management

Debt management provides debtors with a debt repayment strategy, with all funds funneled through the debt management plan and then distributed to creditors. This service is often provided by credit counseling agencies and credit unions, who begin the process by negotiating with creditors and then assuming control of all debts.

These companies often ask that the debtors cancel all but one credit card, which can reduce the debtor’s credit score by impacting their credit utilization ratio.

Balance Transfer

A balance transfer credit card lets you move all your credit card balances onto a single card, one that offers a 0% APR for the first 6, 12 or 18 months, allowing you to pay down debt without interest, thus reducing compounded interest and clearing the debt quickly.

This method works with all credit card debt and you can typically move between 1 and 5 balances onto a new credit card, providing that card isn’t offered by the same company.

The Shame of Debt is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

How did TPG do with its 2020 credit card predictions?

At the beginning of 2020, the credit cards team sat down to predict where the credit cards industry was headed for the new year and beyond. Of course, none of us could have ever predicted that the coronavirus pandemic would turn this year on its head — and the travel and cards industries with it. …

Source: thepointsguy.com

Why these cards did the best during the COVID crisis – The Points Guy

Credit card rewards and benefits saw some serious changes in 2020. Along with generous sign-up offers, perks are one of the primary reasons we sign up for credit cards. However, for some cards, many of those benefits were questionable during the pandemic. Since the onset of the COVID crisis, I’ve been keeping a close eye …

Source: thepointsguy.com

How to Consolidate Credit Card Debt

Credit card debt is on the rise. Millions of Americans are in over their heads. They’re losing sleep, losing control, and worried about what the future will hold. But there are solutions, and consolidation is one of the best.

Consolidation works by “consolidating” multiple debts into one. It’s the perfect solution for mounting debt, one that doesn’t destroy your credit score, liquidate your assets, or make it difficult to acquire mortgages and personal loans in the future.

With that said, let’s look at some of the best ways to consolidate credit card debt.

Option 1: Do It Yourself

The idea of debt consolidation essentially boils down to acquiring a large, low-interest loan and using that to repay multiple high-interest debts. If your credit score is high enough, you can get that loan yourself, clear your credit card debts, and then focus on repaying the loan.

Do It Yourself Consolidation Explained

The average credit card APR is close to 20%. If you have a balance of $10,000 and a monthly payment of $300, this APR will cost you over $4,700 in total interest and your debt will be repaid in just over 4 years. If you were to acquire a $10,000 personal loan at a respectable rate of 8% over the same 4 years, you’ll pay just under $1,800 in interest.

That’s a saving of nearly $3,000 over 4 years, and it’s based on an 8% rate (lower rates are available) and on the assumption that you don’t accumulate any credit card penalty fees or penalty APRs, which are very common on rolling balances.

Pros

  • You Will Save Money: As noted above, this process could save you a lot of money over the long-term and will also free up some additional cash in the short-term.
  • Complete Control: You don’t have to worry about company fees and service charges; you don’t need to concern yourself with hidden terms. With this credit card consolidation option, you are in complete control.
  • Easy on Your Credit Score: While your credit score will take an initial hit because of the loan inquiry and the new account, as soon as you use that loan to clear your credit card debts you should see an improvement. Just remember to keep those cleared cards active, otherwise, your credit utilization ratio will drop.

Cons

  • Good Credit Needed: For this option to be viable, you will need an excellent score. Anything less and you may struggle to be accepted for a low-interest loan. Let’s be honest, if you’re struggling with growing credit card debt, the odds of you having a flawless credit score are pretty slim.
  • On Your Own: While there are benefits to doing everything by yourself, it can also be a little time consuming, and if you don’t know what you’re doing, it can be intimidating.

Option 2: Work with a Debt Management Company

Credit counseling agencies can help you manage your debt by working with your creditors. A new payment structure will be created, and your money will go straight to the agency, after which it will be released to your creditors.

Debt Management Consolidation Explained

To begin the process, search for reputable debt management services in your area. They will assess your situation and determine if you are a good fit for the program. Some charge fees, some don’t, but all will serve as an intermediary between you and your creditors.

Every month you will make a single payment and the money will then go to your creditors. The agency will negotiate reduced payments by bringing the interest rates down and removing fees, therefore making these debts cheaper and more manageable.

Pros 

  • Professional Help: Get quality support from an experienced debt management company, one that will assume control and take the stress away.
  • Cheap: This is one of the cheapest and most cost-effective ways to clear your credit card debt, greatly reducing your total interest repayments.

Cons

  • Fees: Some debt management companies charge fees for their services, although these tend to be nominal and you’ll still save more money in the long-term.
  • Canceled Contract: If you fail to make one of the agreed-upon repayments, your creditors may cancel the improved contract and revert back to the previous terms, erasing all the agency’s hard work.

Option 3: Balance Transfer

A balance transfer is a promotion offered on new credit cards. It invites you to move your balance from your current card to a new one, and in exchange, it offers a period of 0% interest. 

You will need to pay a balance transfer fee, and this is typically charged at between 3 and 5% of the total transfer amount, but it’s often one of the cheapest and easiest ways to consolidate credit card debt.

Balance Transfer Consolidation Explained

As an example of how balance transfers work, let’s imagine that you have three credit cards, each with a maxed-out balance of $10,000 and an APR of 20%. If you’re repaying $300 a month, that’s $900 a month and in 4 years and 2 months, you’ll pay around $14,000 in interest to clear the full $30,000.

Alternatively, you can move all three balances onto a single balance transfer card with a $30,000 limit. Immediately, that balance could grow to $31,500. If you continue paying $900 a month and the balance transfer period lasts for 18 months, the balance will be just $15,300 when interest begins to accrue again. And if you use that 18-month period to initiate a debt repayment strategy, you could clear it in full and avoid paying any interest.

Pros 

  • Multiple Balances Can be Consolidated: You can consolidate multiple credit card balances, providing you’re not moving them to the same creditor.
  • No Interest Repayment: If you plan it properly, you can repay your balance in full before accruing any interest.
  • Available to Everyone: Credit cards are generally easier to acquire than low-interest personal loans and you won’t need an excellent credit score to get a good one.

Cons  

  • Higher Interest: The interest rate and fees may be higher once the 0% balance transfer period ends. If you use the intro period to avoid repayments and not to clear your debt, you could find yourself in serious trouble when interest begins to accumulate again.
  • Large Limits May be Difficult: The bigger your current credit card balances are, the harder it will be to get a balance transfer card with a large enough limit.
  • Fees: Although it’s a great option for consolidating credit card debt, it’s not completely free, as you’ll pay an initial balance transfer fee.

Option 4: Debt Consolidation Loans

Some companies offer specific loans tailored toward debt consolidation. These options work a lot like personal loans, as they are large loans designed with consolidation in mind. However, there are a few key differences, including the fact you don’t need an excellent credit score.

Debt Consolidation Loans Explained

The ultimate goal of debt consolidation loans is not to save you money in the long-term or to reduce the debt period. In fact, it does the opposite. The goal is to reduce your monthly payment and give you a smaller rate of interest, but it does this while increasing the loan period, which means you ultimately pay more money over the term.

Pros

 

  • More Money Every Month: Your monthly payments will be reduced, freeing up some extra cash to use every month.
  • Cleared Debts: Your credit card debts will be cleared in one fell swoop, potentially giving you some financial breathing space.

 

Cons

  • Longer Period: The total length of your debt will be extended, which means you’ll be stuck with the debt for a prolonged period.
  • Cost: While you’ll save some money every month, you’ll do so at the cost of an increased overall balance. Depending on your credit score, you could find yourself paying thousands more in total repayments.

Other Credit Card Debt Consolidation Solutions

If you have a supportive and financially-free family, you can ask them for the money to clear your debts and then promise to repay them in time. 

Of course, this option isn’t without its problems. Firstly, there’s the old adage that you should never lend money to friends or family. It may seem pretty heartless, but it’s a saying steeped in experience. It causes problems, as that debt is right at the bottom of the borrower’s list of priorities and if they’re skipping payments and begging for relief, while at the same time buying new clothes and going out every night, it can anger the borrower.

To avoid these issues, agree to pay them in monthly installments, offer a little interest, and get everything in writing. Make that debt your priority, because by skipping your payments you’ll be hurting your finances and your relationships.

Don’t guilt-trip a friend or family member into lending you money. Don’t ask them unless you have a very close relationship with them, have known them a long time, and know they can easily afford to lend you money. The last thing you want is for them to leave themselves short or to acquire debt just to help you out.

Alternatively, if you own a significant amount of home equity, you can opt for a home equity loan. This will give you a sizeable loan charged at a small rate of interest. It will take longer to repay your mortgage, but by reducing your debt demands you’ll save more money in the long-term.

How to Consolidate Credit Card Debt is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

FAQ About Those New AmEx Offers Released Today

Update 1/5/21: Added what happens when you make a $100 purchase for Home Depot & Best Buy. Also added what happens when you purchase through PayPal.

Here’s an FAQ about the slew of new AmEx Offers that came out today:

Which cards were targeted for these new offers?

Most of these new/good/interesting offers are for the Platinum personal card.

Notable Offers?

The most interesting offers on the personal Platinum card are the free $100 at Best Buy and free $100 at Home Depot and free $50 at Home Chef and free $60 at Wine Insiders on personal Platinum cards.

What Happens If I Make a $100 Purchase For The Two $50 Credits?

The Best Buy & Home Depot deals are spend $50, get $50 back and can be done twice. There are now multiple datapoints (1,2) that if you make a $100 purchase this will trigger both $50 credits. I suspect this will probably change and I’d still be making two purchases to trigger both as American Express has a history of retroactively fixing these things.

What Happens When You Purchase Through PayPal?

This will trigger the PayPal credit but not the individual merchant credit:

  • Home Depot: 1,

I don’t have a consumer Platinum card. Is there anything for me?

Notable offer on other cards:

  • Get $25 credit for $500 spend, can be done 10x for up to $250 in credits. Lots of people got this in Blue Business Plus, Business Platinum, SimplyCash business card, and maybe others.
  • Get 4x Bonus Membership Rewards On Wireless, Shipping, Advertising, Gas and Office Supply. This is found on the business Platinum and business Gold.

I have a consumer Platinum card. Why wasn’t I targeted with these offers?

The fine print states clearly for most/all of these offers that it’s only for those who had the card from before November 1, 2020. Should be showing for all Platinum cardholders from before that date, and on all versions of the Platinum card; let us know if that’s not the case.

(Update: some Platinum cardholders – from all the various versions – are not seeing these offers, apparently it’s somewhat targeted.)

Will these offers work on gift cards?

Some of the offers have terms excluding gift cards. In practice, I’ve seen reports of email confirmations coming from gift card purchases too, but it’s impossible to know if AmEx will crack down on that and claw back the credits at some point in the future.

Worth noting: the Best Buy offer only excludes e-gift cards, so physical gift cards should be fine for that one.

 

Can I get the offers on multiple cards?

Like all AmEx Offers, each person/SSN can get it on just one of their cards, even if you hold more than one Platinum card and see it on both. If you have authorized user cards, the authorized user can get it as well.

When Will The Credits Post?

Terms state that ‘Statement credit will appear on your billing statement within 90 days after 6/30/2021’, though historically AmEx Offer credits post just a few days after the charge posts.

Source: doctorofcredit.com

Prefer the Train? Here Are 4 Credit Cards for Riding the Rails

[UPDATE: Offer(s) below is no longer available through our site. Please visit our credit card marketplace for current offers.DISCLOSURE: Cards from our partners are mentioned below.]

If you prefer traveling by train, you’re already familiar with the advantages of riding the rails. You can avoid the hassles of airports and highways, travel in comfort, and take in the scenery as you go.

Many travel credit cards are singularly focused on flights and hotels. But some offer rewards that are just as valuable for train travelers.

Here are four travel credit cards for riding the rails.

1. Amtrak Guest Rewards World Mastercard

Rewards: Three points per dollar on Amtrak purchases; two points per dollar on eligible travel purchases; one point per dollar on all other purchases.
Sign-Up Bonus: 20,000 bonus points if you spend $1,000 in the first 90 days.
Annual Fee: $79
Annual Percentage Rate (APR): 16.49% to 24.49%, based on your creditworthiness (as of 12/19/2019).
Why We Picked It: This card is designed for regular Amtrak riders.
For Rail Travel: You’ll earn triple points on all Amtrak purchases, double points on qualifying travel purchases, and single points on every other purchase. Points can be redeemed for car rentals, hotels, gift cards, and more. But when you redeem for Amtrak travel, you’ll earn a 5% rebate on points. You’ll also receive a free Amtrak companion pass with a yearly renewal once you open your account.
Drawbacks: If you don’t ride Amtrak, this card isn’t for you.

2. Chase Sapphire Preferred

Rewards: Two points per dollar on dining and travel; one point per dollar on all other purchases.
Sign-Up Bonus:
60,000 bonus points if you spend $4,000 in the first three months from account opening.
Annual Fee:
$95
APR: 15.99% – 22.99% Variable .
Why We Picked It: All travel purchases earn points that are redeemable for future trips.
For Rail Travel: Your travel purchases, including train tickets and public transportation, will earn double points. There are many redemption options, but you’ll get an extra 25% in value when redeeming points for travel through Chase Ultimate Rewards.
Drawbacks: There is an annual fee. 

3. Citi ThankYou Premier

Rewards: Three points per dollar on travel; two points per dollar on dining and entertainment; one point per dollar on all other purchases.
Sign-Up Bonus: None
Annual Fee: $0 the first year, then $95.
APR: 
17.49 t 25.49%, based on your creditworthiness (as of 12/19/2019).
Why We Picked It: With triple points on travel, you can rack up rewards quickly.
For Rail Travel: You’ll earn three points per dollar on travel, including passenger and commuter railways. Points can be redeemed for travel, gift cards, merchandise, and more.
Drawbacks: There is no sign-up bonus. 

How to Choose a Card for Rail Travel

If you primarily travel by train, you’ll want a card that offers great rewards rates for those expenses. With the exception of Amtrak’s travel credit card, there aren’t many cards on the market that single out trains. However, many cards do count rail travel as part of their overall travel category.

For any card you’re considering, verify that train fare will earn travel rewards and that rail travel is a valid redemption option.

What Credit Is Required for Train Travel Rewards Credit Cards?

The best travel credit cards may require good or excellent credit. Make sure you meet the credit requirements of a card before you submit an application. You can check your credit report card for free at Credit.com.

Image: istock

At publishing time, the Chase Sapphire Preferred Card and Barclay Arrival Plus World Elite Mastercard are offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment. This content is not provided by the card issuer(s). Any opinions expressed are those of Credit.com alone, and have not been reviewed, approved, or otherwise endorsed by the issuer(s).

Note: It’s important to remember that interest rates, fees, and terms for credit cards, loans, and other financial products frequently change. As a result, rates, fees, and terms for credit cards, loans, and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees, and terms with credit card issuers, banks, or other financial institutions directly.

The post Prefer the Train? Here Are 4 Credit Cards for Riding the Rails appeared first on Credit.com.

Source: credit.com

What credit card should I get?

One of the questions I’m asked the most is, “Which credit card should I get?”

There’s not a one-size-fits-all answer, but here’s how to narrow it down:

Which credit card to choose if you carry a balance 

If you’re in credit card debt, then you need to prioritize your interest rate over rewards. The average credit card charges 16.05%. It doesn’t make sense to pay interest just to earn 1%, 2% or 3% in cash back or travel points.

If you have credit card debt, forget about rewards for now. You can avoid interest for up to 18 months with the right balance transfer card. And some card issuers (especially credit unions) charge ongoing (non-promotional) rates as low as the 6%-9% range. Don’t chase rewards if you’re revolving a balance.

If you have credit card debt, I recommend these cards:

  • Citi Simplicity® Card*: 18-month 0% intro balance transfer offer; transfers must be completed in the first four months; 3% balance transfer fee ($5 minimum); 0% introductory purchase APR for 18 months; regular variable APR of 14.74%-24.74%
  • Wells Fargo Cash Wise Visa® card: 15-month 0% intro balance transfer offer; intro balance transfer fee of 3% or $5 (whichever is greater); transfers must be made within 120 days to qualify for intro offer; 0% intro purchase APR for 15 months; regular variable APR of 14.49%-24.99%; regular balance transfer fee of 5% or $5 (whichever is greater)
  • BankAmericard® credit card: 12-billing-cycle 0% intro APR balance transfer offer; must complete the transfer within 60 days of opening the account; 3% or $10 transfer fee, whichever is greater; introductory 0% purchase APR for 12 billing cycles; regular variable APR of 12.99-22.99% on purchases and balance transfers

See related: Balance transfer cards with no transfer fee

Which card to pick if you don’t have any credit card debt 

Now we’re on to the fun stuff! The key questions at this juncture focus on how much effort you want to put in, how you spend your money and what you want to get out of your rewards.

Some people treat credit card rewards like a game. It’s fun for them, and they spend time looking for the best deals and juggling multiple cards. Yet about three-quarters of credit card holders prefer simplicity and would rather use the same card or two as widely as possible, we found in an August 2019 survey.

You won’t get the best rewards with that approach, but you can still do pretty well. Here are my favorite flat-rate cash back cards:

  • Alliant Visa Signature Card: 2.5% cash back on every purchase with a $99 annual fee; in your first year (waived your first year)
  • Citi® Double Cash Card: Essentially 2% cash back on everything (technically 1% when you buy and 1% when you pay it off); no annual fee

If you make more than $20,000 in credit card charges in a typical year, the Alliant Credit Union Visa Signature is a better bet despite the annual fee.

Which card to pick if you’re willing to put in a little work to earn better rewards 

Dividing your spending among multiple cards is the best way to reap higher returns. At this stage, you need to consider how you spend your money. Different cards incentivize different types of spending (e.g., travel, restaurants, groceries, entertainment).

You also need to think about your desired redemption. Cash back has the broadest appeal (after all, who couldn’t use a little more cash?), although travel rewards are usually the most valuable. Some 49% of U.S. adults have at least one cash back card, 20% have an airline or hotel rewards card and 19% have a general travel rewards card, our research shows.

Chase Sapphire Reserve, the American Express® Gold Card, the Citi Premier® Card and the Capital One Venture Rewards Credit Card).

Each of these issuers has more than a dozen airline and hotel transfer partners, plus you can book an even wider variety of flights and hotels directly through the card companies. These programs provide tons of flexibility, and in terms of cents per point, they generally offer higher returns than cash back cards.

Parting advice

As you can see, picking the right credit card for you is an individual decision. I’ll leave you with two more thoughts:

You’re doing well as long as you’re avoiding credit card debt and redeeming rewards for something that’s valuable to you.

Not everyone wants to fly to the Maldives in first-class and stay in an overwater bungalow. Even if it yields fewer cents per point, a free flight to grandma’s house or cash back on everyday purchases could make more sense for your particular situation.

You should absolutely consider sign-up bonuses when evaluating credit cards, but don’t lose sight of the fact that your credit card strategy should be a long-term pursuit. Especially if you’re new to credit, focus on ongoing value rather than card churning.

* Information about Citi Simplicity has been collected independently by CreditCards.com. The issuers did not provide the details, nor are they responsible for their accuracy.

Source: creditcards.com

What Is Cash Back?

What Is Cash Back?

Cash back is a rewards benefit that many credit cards offer to cardholders. By taking advantage of it, you’ll receive back a prespecified percentage of certain purchases you make. Many credit card companies will provide higher cash back rates on certain types of purchases, such as airfare, gas, food and more. Cash back is just one way that credit cards offer rewards, as mileage and points are some alternatives.

Before you spend too much money with your credit cards, make sure you have a financial plan in place. Speak with a financial advisor today.

What Is Cash Back?

The most commonly recognized style of cash back is what you have likely seen advertised as cash back credit cards. This specifically refers to earning a certain percentage of your credit card purchases back as cash rewards. However, cash back rates vary widely, as do the categories that they apply to.

You usually won’t see credit card cash back rates higher than 5%, while 1% is the typically minimum you will earn. Cash back categorization is significantly more complex though, with a merchant category code (MCC) system being the main organizing force.

MCCs run the entire cash back industry, as they ultimately decide how each purchase you make is classified. These designations coincide with cash back rates set by the issuer of your card. For example, you could use your card for a $50 dinner at a steakhouse, which has a “restaurant” code. If your card offers a 2% cash back rate on all spending at restaurants, you’d earn $1 cash back.

Familiar alternatives to cash back include point- and mile-based programs, though many cardholders are partial to cash back. Cash back affords cardholders an independence that is ideal, since you can redeem it for nearly anything.

Popular Cash Back Credit Cards

What Is Cash Back?

Discover, American Express, Mastercard and Visa all have cash back rewards credit cards available for prospective cardholders. Each abide by their own set of regulations, though card issuers decide on cash back rates, promotions and bonuses. Chase, Wells Fargo, Citi and Capital One represent some of the most active card issuers on the market today.

Below are a few examples of what you can expect to earn when looking for a cash back credit card:

Cash Back Credit Cards Card Name Cash Back Rates Cash Back Bonus Costco Anywhere Visa Card by Citi 4% cash back on eligible gas up to $7,000 per year, 3% cash back on eligible travel and restaurants, 2% cash back in-store and online with Costco and 1% cash back elsewhere None Bank of America® Cash Rewards credit card 3% cash back in a category of your choosing, 2% cash back at grocery stores and wholesale clubs and 1% cash back on all other purchases (up to a quarterly cap of $2,500 in combined grocery/wholesale club/choice category purchases) $200 bonus cash back for spending at least $1,000 over your first 90 days Capital One® Quicksilver® Cash Rewards Credit Card Unlimited 1.5% cash back everywhere $150 cash back bonus when you spend $500 during your first three months Citi Double Cash Card 1% cash back on your purchases and another 1% cash back when you pay your bill None Capital One® Savor® Cash Rewards Credit Card Unlimited 4% cash back on dining and entertainment, 2% cash back on groceries and 1% cash back elsewhere $300 cash back bonus for $3,000 spent over your first three months TD Cash Visa® Credit Card 3% cash back on dining, 2% cash back at supermarkets and 1% cash back on everything else Earn $150 cash back when spending $500 within the first 90 days (See Terms) USAA Preferred Cash Rewards Visa Signature Unlimited 1.5% cash back on everything None Blue Cash Everyday Card from American Express 3% cash back on up to $6,000/year at U.S. supermarkets (then 1%), 2% cash back at U.S. gas stations and select U.S. department stores and 1% cash back on other purchases $150 bonus cash back for spending $1,000 over your first six months Getting Cash Back at Retailers

What Is Cash Back?

Picture this: you’re buying some groceries on a Sunday morning, but know you’ll need $40 cash to fill up your car with some gas later. You could swipe your debit card at the supermarket and then head over to the ATM. Or you could ask for cash back right from the cashier, eliminating the extra errand.

The above situation represents the alternative definition of cash back. It’s ultimately the use of a cash register as if you were swiping your debit card at the ATM. When you request cash back from a cashier, your bank account will be charged the amount you asked for. This enables the funds to be pulled from your account so the cash can be placed in your hand.

Although this generally only applies to debit cards, there are a few exceptions for credit cards. Discover® allows cardholders to ask for cash back at more than 50 large retail stores without a transaction fee.

Bottom Line

There are many benefits to utilizing credit card rewards programs. But spending money that technically isn’t yours will always involve some level of risk. If you’re in good financial shape, though, cash back and other types of credit card rewards can help you take more vacations, save money on purchases and more.

Credit Card Tips

  • Managing your credit cards and any debt you accumulate using them is a major part of your long-term financial outlook. Consider working with a financial advisor to make sure you’re managing your money with your goals for the future in mind. SmartAsset’s free matching tool can connect you with up to three advisors in your area. Get started now.
  • If you’re someone who wants freedom when spending credit card rewards, you may prefer cash back to a points- or mileage-based reward system. However, keep in mind that cash back rates are sometimes less than those in point-centric programs.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

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Tips For Getting The Most Out Of Your Credit Cards

Credit cards can be a useful tool if you do your research a make a plan for your spending. Here’s how to get the most out of your credit cards.

The post Tips For Getting The Most Out Of Your Credit Cards appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

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