According to the Consumer Price Index, the annual inflation rate as of January 2022 was 7.5%. The Russian invasion of Ukraine has already pushed that even higher, meaning everyday items like groceries, gas, electricity, and clothing cost more and more. With the average employee raise of 2-3%, consumers pay more for less.
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But, a new wave of credit card incentives may offer spending assistance, returning a portion of your purchase to you in the form of cashback, travel points, stocks, or cryptocurrency.
New companies like M1 with the Owner’s Rewards Card that gives you extra cashback in the form of stock at select companies and BlockFi with its Bitcoin-rewards Visa are on the market.
If investing isn’t your thing, there’s the Paceline Credit Card that offers cashback for meeting your fitness goals, the Ugami card for gaming merchandise, or the Bilt Rewards Card that lets you earn points when you pay your rent. Keep reading to learn more about these rewards to find the right card for you.
Cash-Back Rewards
Cashback credit cards offer cashback on your everyday spending. The rate varies by type of spending (ie. grocery stores, gas, shopping store, restaurants, etc.). However, it’s still cashback that you can spend somewhere else later.
Some cashback programs are based on a flat cashback rate, while others have tiered categories, where certain purchases earn a larger cashback rate. Various programs require you to opt-in for extra rewards for certain purchases. This is common around a new quarter to entice you to use the card.
Most cashback credit cards do not charge their holders annual fees. However, some do, which means the rewards can be negligible if the card isn’t used much. Most credit card companies offer amazing sign-up bonuses to their holders. As a result, it entices new users to join their program and sometimes spend more than they were planning.
Travel Rewards
A travel reward credit card allows cardholders to earn incentives and discounts on travel. These rewards give free stays in your favorite hotel, room upgrades, dining credit, complimentary services like massages, flight upgrades, baggage insurance, and more.
You’ll find major travel rewards credit cards like the Chase Sapphire Credit Card, American Express Platinum, the Capital One Venture Card, among others, but they generally come with an annual fee for the best perks. And you can earn airline-specific miles with cards like the Delta SkyMiles, Gold American Express Card, and the American Airlines AAdvantage credit card.
Some credit card companies allow holders to transfer points to hotels and airlines. So, cardholders get to use their points with the airline of their choice. It all depends on the fine writing called the terms and conditions.
Investing Rewards
Being able to invest in stocks or crypto without making room in the budget sounds like a dream. Cards like the Owner’s Rewards Card offer cashback to buy stock, as long as the shares get capitalized into your M1 investment account. The rewards range from 2.5-10% cashback, depending on the brands you hold in your portfolio. CNBC said, “you save on your purchases, support the businesses you have a financial stake in and increase your ownership along the way.” Sounds promising.
However, you’re limited to stocks at M1, and the card does have an annual fee of $95. The card could be expensive if you don’t normally shop where you get the most cashback.
Crypto Rewards
Crypto reward credit cards function like traditional credit cards. The difference being the funds and rewards are digital assets that can be transferred to your digital wallet.
These cards are backed by popular financial organizations like Visa and MasterCard, allowing cardholders to enjoy flexibility while spending.
Most crypto credit cards do not charge any fee for ownership or membership to allow for easy adoption. Unfortunately, Bitcoin is not a worldwide form of legal payment. As a result, cardholders may find it hard to find a shop or store to spend their crypto rewards. Other crypto reward programs allow you to invest in crypto rather than spend it. If you’ve been interested in investing in Bitcoin, but don’t want to take the risk, a crypto reward credit card may be a good alternative.
So How Do You Choose?
Eric Simonson, a certified financial planner from Abundo Wealth, advises clients to pick a card that fits their goals. Of course, you need to have a budget in place and spend responsibly. The card’s benefits are eroded when you don’t pay it off in full every month. Many clients find that travel rewards go the furthest in terms of value when compared to cashback cards. However, cashback cards work well for clients who don’t like to travel.
The Bottom Line
Understanding the credit card’s reward structure and applicable fees is important. Find a card that fits your spending needs and goals. You’ll need to budget and keep close track of your cards and rewards. And you’ll have to pay the balance every month to avoid interest and maximize rewards.
A certified financial planner at Bormann Wealth Management, Nick Bormann says there are tradeoffs to getting the biggest rewards. You can earn travel points with one and cashback or stocks with another. However, you’ll be required to make specific purchases if you want to maximize the rewards that come with each card. This may lead you to shop with multiple cards and overspend. Of course, on the other hand, if you don’t spend large amounts of money in specific categories, target bonuses might not be worth the hassle of owning a credit card.
Alternatives to credit card rewards include cashback apps like Rakuten and Ibotta, store points for purchases, and good old-fashioned coupons and sales. Kohl’s is known for Kohl’s dollars to bring shoppers back at specific times, and other stores like Walgreens, CVS, Ulta Beauty, Target, and many more offer points that can be redeemed for cash off future purchases.