Often, I will have potential credit card appliers ask how a cash back credit card can help them save money.  I’m going to lay it out in simple terms on how you can use it and how you can save each and every month.  It’s not hard to take advantage of the rewards as long as you follow these rules.  ALWAYS pay your bill off in full on time.  If you can follow this simple rule, you’ll be able to take full advantage of the rewards.  The reason you want to pay your card off in full is because of the interest rate charges.  If you don’t pay it off in full, you’ll get a high APR tacked onto your bill.

I’m going to provide an example here and how you can save.  I’m going to create a “credit card” and I’m going to create a consumer on how he/she spends.  I will then show you how much you can potentially save.  Remember, it’s going to vary between the cards you apply for because they are all different.

Credit Card Example
The credit card we are going to use will offer the following rebates on the following items –

  • 5% cash back on all gas, super market, and drug store purchases
  • 1% on everything else

This is how most cash back cards work but not all of them.  Some of them have set percentages and some don’t.

Now, let’s say you’re a typical spender with just 2 people in your family and you put a lot of your bills on your credit card, which you pay off each month in full:

  • Mortgage:  $600/month
  • Car Payment:  $200/month
  • Car Insurance:  $200/month
  • Groceries:  $100/week
  • Cable / Internet:  $100/month
  • Utilities (water, electric, garbage, etc) :  $125/month
  • Entertainment $300/month
  • Gas $50/week
  • TOTAL:  $2125

Now, let’s look at what we could save with our cash back credit card we mentioned above.

  • Mortgage:  $600/month + 1% discount = $594
  • Car Payment:  $200/month + 1% discount = $198
  • Car Insurance:  $200/month + 1% discount = $198
  • Groceries:  $100/week + 5% discount = $380/month
  • Cable / Internet:  $100/month + 1% discount = $99
  • Utilities (water, electric, garbage, etc) :  $125/month + 1% discount = $123.75
  • Entertainment $300/month + 1% discount = $297
  • Gas $50/week + 5% discount = $190
  • TOTAL:  $2079.75

At first, it doesn’t look like a lot but remember, you’re going to be paying these bills regardless.  If you had this program, you’ll be able to save $45.25 each month.  That’s almost enough for a free bill!

As I already mentioned, every card is going to be different.  With some, you’re going to be able to save a lot more and some, you won’t save this much at all.  Make sure you do your research when looking for a credit card and as long as you use it responsibly, you’ll be able to save this much and more every month.


Related posts:

  1. Pros and Cons of Cash Back Credit Cards
  2. Truth About Cash Back Credit Cards
  3. Cash Back Bonus Credit Cards
  4. What Can I Save With A Cash Back Card?
  5. Credit Cards Offering Cash Back