This holiday season had me thinking about credit card rewards programs and how beneficial they can be. As I waited in line at a department store watching several people go through the line paying with a credit card, I noticed something. Many of the credit cards being used did not provide any benefit to the person using them! I personally only use credit cards that provide me with a cash back bonus that I can use for anything, so I thought to myself, “I should tell people about what I do!”

First of all, I will say that using credit cards and paying them off every month provides numerous benefits. It improves your credit score, it makes budgeting easier, and you can get rewarded for using it. When it comes to your credit score, it is important to note that you should have a credit card limit three times above what you spend per month on it. If you spend more than that, say 50% of your credit limit each month, then you get a knock on your credit score that says your ‘revolving balances are too high’. Even if you pay it off each month. If you keep it below the 33% threshold though, your credit score will rise over time. Just be sure to pay it off each month, so you don’t incur any interest charges.

Credit cards can make budgeting easier as most credit card companies will categorize your charges for you and offer downloads into various budgeting programs. I have found this very helpful when trying to understand my expenses as I can go in each month when my statement is posted and go through and input my expenses into a budget spreadsheet to track my spending. In addition, it is much nicer to pay two credit card bills each month versus many tiny bills.

However, the largest reason I use credit cards is for the cash back rewards! I personally have two cards that I use religiously that I will share with you with the caveat that what I have may not be right for you. Some people who fly a lot may want airline mile rewards cards, but I am focusing just on cash back reward cards. My first card is an American Express Blue Preferred Cash back card. I get 6% cash back at supermarkets up to $6,000 a year in spending and 1% after that. So if I spend $6,000 at supermarkets throughout the year, then I get back $360. On top of that, I get 3% cash back at gas stations and 1% everywhere else. This card does cost $95 per year; however, the rewards more than outweigh the cost. For example, if I spend $1,000 a month at supermarkets, then my annual reward is $420. If I average $200 a month on fuel, then my annual reward is $72. Between those two, I get $492 in cash back. Take out the $95 annual fee and I still have a reward of $397 on $14,400 in spending or 2.75% average cash back. However, in order to maximize my cash back, I also have a Capital One Quicksilver card with no annual fee and 1.5% cash back on everything. So after I hit my $6,000 in supermarkets on the American Express, then I use the Quicksilver for everything except for gas. And it super easy to cash in the rewards online by simply logging into your account and getting a statement credit. The cash back becomes especially handy around this time of year as I can cash in the statement credits I’ve accumulated to pay for gifts rather than having to pay out of cash flow!

There are plenty of internet resources out there to help you find the right credit card and I strongly suggest you do research and find the card that fits with your spending. I hope that with this article, I see less people using their personal bank credit card or debit card with their horrid reward programs! Happy Holidays!