3 ways to max out your credit cards

Almost everyone in the civilized world has had a credit card at one time or another.  A credit card can be a powerful tool.  It is essentially a 30-day loan from the credit card company (Visa, Mastercard, American Express etc.) with a certain limit to buy whatever you want.  Responsible users use credit cards to pay bills and buy things they already use such as gas and groceries, and then pay the bill in full every month.  Irresponsible users think of a credit card as an invitation to a shopping spree and buy stuff until they reach the credit  limit.

This article isn’t about that type of maxing out.  It’s about maxing out RESPONSIBLY.  That is, maximizing your credit card use to get the most rewards as possible.  It is actually the opposite of the traditional way of maxing out a card.  This type of maxing out is only done by responsible credit card holders who know that it is vitally important to avoid credit card debt at all costs, and also know how to get the best rewards quickly.  Here are the top 3 ways to fully unlock the reward potential of your reward credit cards:

1.  Sign up bonuses

Any reward credit card worth its salt will give you a bonus when opening a new account.  For example, as of this writing the CashRewards card from bank of America gives a sign up bonus of $100 after you spend $500 in 90 days.  Between money spent on gas, groceries, phone bills etc., spending $500 in 90 days is not that hard for most people.  Doing it with this card will give you a $100 bonus to be used on anything.  It’s usually best spent as a statement credit, essentially saving you 20% on a $500 credit card bill.

This is a nice little bonus, but in the grand scheme of things it’s not too much.  The fun starts when you are able to sign up for multiple rewards cards which offer bonuses.  Doing this can net you a couple of hundred dollars easily.  While you can usually only receive a bonus the first time you sign up for a card, there are always new bonus offers coming out so this can be a nice little perpetual bonus machine.  Obviously, it’s important to remember to get only enough cards where you can comfortably afford the spending limits.  Otherwise you potentially force yourself to buy things you never intended.  Also, signing up for multiple cards doesn’t really hurt your credit score in the long run.  This is because paying your bills on time is the most important factor in having a good credit score according to myFICO.

2.  Category bonuses

There are all types of rewards cards offering different types of category bonuses.  What that means is that you get extra points back for buying stuff in certain categories.  For example, the American Express Blue Cash Preferred offers 6% cash back on groceries and 3% cash back on gas.  This is a great card if gas and groceries comprise a large amount of your spending.  Having these category bonuses is nice because they give you an additional bonus on top of the standard 1%.  If you have cards with bonuses for things you already pay for such groceries, gas, eating out, cable bills etc., you can really maximize the points you receive just by spending money on the things you already buy.  There are many different cash back and points cards out there for different categories, so it definitely pays to look around and find the one that suits you.

3.  Use cards for everything

No, this doesn’t mean buy everything in sight with your cards.  It just means wherever you can use your card, use it!  There’s no need to use actual cash unless they don’t accept credit cards or they charge a “convenience” fee for using one (this is one of my biggest pet peeves.)  Using a card for everything you buy has two main advantages.  One, it maximizes the number of points that you receive.  Especially good when spending with sign up or category bonuses.  Two, putting all of your purchases makes it really easy to budget and see where you exactly are spending your money.  It takes a special kind of person to enjoy carrying around wads of old crumpled receipts in their pockets all day.  A credit card makes it easy to avoid this, as you can just get online or even on your phone to check on your transactions.

Some say that having a credit card can make you spend more than usual.  But if you use them responsibly, it can be the exact opposite and actually help you budget.  Maximizing your credit card use with sign up bonuses and category bonuses can give you a nice perpetual bonus.

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Comments

  1. Great article and I love the rewards on offer if you sensibly use credit cards!!

    • Syed says

      Sensible use of credit cards is the key. Thanks for the comment!

  2. Barbara says

    Gift giving budget is solely rewards! I tried to purchase my new car with my Discover but the dealership would only allow $3000. It takes discipline, but it pays off. I love it when they pay me to use their card.

    • Syed says

      That’s a great use of cash back. One time I used a cash back reward from a bank of america card to pay extra on one of my student loans which was from bank of america! You’re absolutely right we might as well take the money if they’re gonna give it away. Thanks for the comment Barbara.

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